Wednesday 23 June 2010

Not a "good" trading day

After yesterday's "good" trading day - one where the trading systems were followed precisely and achieved exactly the result predicted - today was not a "good" day. It was a psychologically difficult day that eventually wore me down and led me to a couple of decisions later in the day that were not "good".

In both equities and crude oil, the early pattern for the day was one of a sequence of gentle whipsawing moves. It remains incredibly difficult to keep trading with the systems when they indicate a buy at a certain level, the market rises to exactly that level, the trade is executed, only for the market go immediately fall from exactly my buy price, dropping 50 or 60 points before the next sell signal is hit and the reverse happens with the market rising as soon as I am short! This happened several times in a row yesterday. In particular, there was a point where I had an open profit in crude of +65, the market fell causing be to exit and go short with just 5pts of profit left, whereupon the market rallied all the back and then beyond the previous high. So annoying, so unprofitable and so psychologically damaging.

My crude trading systems include one counter-trend trading system. Most of the time this acts mainly to take profits on trend-following positions and keep my next position lower than its theoretical maximum. It is extremely rare for all the systems to be the same way round, giving their maximum position. But after the sequence of losing trades that had occured more or less all through the day, all the systems moved to indicate shorts. In theory this should have given me my theoretical maximum position size but I bottled out, fearing I was going to get whipsawed again. Of course the market then fell all the way to the close and my maximum position size would have been perfect.

Moreover, by around 8:00pm, I had finally moved back towards break-even for the day and was beginning to fear that after the large fall, a late day rally would take me back well into loss. So I took a series of profits on the open trades. Sure enough, the markets continued down to the close and I lost a possible 30pts.

So a day that turned out flat should have been a decent enough profit of +65pts

What I don't fully understand yet is why I just can't accept the outcome of the systems. I have no evidence that my intra-day changes add to profitability - quite the reverse in fact. Why not just take the system's result and leave it at that, not bothering with any tweaks I feel might improve matters? This is my recurrent goal at the moment - to trade exactly as the systems say all the way to the close. And to do that every day

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