If I may offer some thoughts of mine on the trade I made today so that maybe someone else will be helped. If sharing these thoughts is kinda stupid, someone tell me and I will stop trying to share my trading thoughts as I go on.....I am hoping that this will help others and maybe someone will have a perspective that I am missing.
First off, I have had a rough week. Sick kids, no trading even though I have seen trades, little actual work has been done, so I went into this afternoon rather wound up. Not a good condition to trade. I should have simply taken today off and gotten myself in a better frame of mind. Mistakes are generally made for me when I am under mental stress.
Second, I placed the trade after the SPOOs had dropped 8 points becasue I was remembering the missed 20 point tanking on Monday. During that run I wanted to short, never did and it kept going.
Third, since I trade with 4 point stops, it would have been safer to sell into the up market at almost any point during the rise than to sell after dropping 8 points. I almost sold at 88.50, cause the stop would have been 92.50 which I did not see as probable, but I thought I might get one more chance at an even better entry....that never came.
Which brings me to my conclusion on selling a dropping market....a four point stop won't work. Either sell with a real tight stop, cause you will know if the trade is going to work almost immediately. If it keeps dropping you can re-establish a four point stop right away, cause you will have four points almost right away. If it doesn't keep dropping right away, exit and sell the next bounce if you are convinced it is going to drop. I am going to refine this and work it into my rules.
I will have to look at some charts of a runaway drop (20 points or more) too see what the time frames are, but my memory says five minutes or less you will know if you are correct or not.
Had I exited right away, I could have exited with a 1, maybe 1.5 point loss. The new short entry would have been near my exit at 85 to 86 as STOCH was very overbought and it was hitting some resistance levels. I would have turned a losing proposition into a winning proposition.
Such is life....
-Scott
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