Thursday, April 13, 2006

Carnage

Day 9 - Wednesday
Total Account Value: $5281
Available Equity: $3425
Positions Opened: 3
Positions Closed: 4

Carnage. That's what happens when the All Ordinaries opens roughly 40 points down on the back of a similarly sized rise the previous day. Three days of strong direction changes is bad news for a short term trader with a strategy like mine. Longs on Sonic Healthcare (SHL) and MIG were blown out of the water, with the losses on SHL particularly painful due to the slightly larger position size.

Talk of rising interest rates and volatility of the major global indices is playing havoc with my trading efforts. I wish all of this happened a few months ago. It really is difficult to predict what will happen the next day - once I turn on my PC in the morning and notice what happened around the world I've already lost. The longs are in place and gapping is a certainty.

I need to be proactive, so I immediately turn full circle and short MIG because it has now definitely fallen below short-term support and the 20-day SMA. On a day like this, go with the trend. Promina Group, which I complained about yesterday because it seemed sluggish in continuing its bearishness, began to respond and I was thanking my lucky stars that I was careful enough to retain both longs and shorts in my portfolio.

But the damage was already done with the aforementioned losses, which combined with the collapse of CML and Jubilee Mines (JBM) left me roughly $500 in arrears by lunchtime. Luckily though, these two seemed strong as they slowly made ground throughout the day. All signs pointed to JBM continuing its charge so I was keen to retain it.

But then, a huge embarrassing mistake sunk my spirits. I felt a little vulnerable with no solid opportunities to gain from the negativity. I scanned chart after chart finding nothing really suitable to short. That is until I checked CSR, which I have been monitoring over the past few days because it gapped down underneath support.

I have a soft spot for this stock. They are upping ethanol production and in late November 2005 I made the call it would start to make solid ground. It did to the tune of nearly 50% but sadly I missed the boat completely. Anyway, the past two days saw strong bearishness and the price was now underneath the 50-day SMA. I checked the price depth and the sellers seemed out in force, so I shorted with a tight stop loss.

Barely 10 minutes later, as if to mock me and shatter my confidence after taking a morning hit, the price rose cent by cent. It broke my stop loss, and that was a quick $120 down the drain. Without this blunder my closing balance would not have looked so bad considering the circumstances. It was a harsh lesson to always keep emotions out of the trading room. Looking back today, overly high volumes after the gap down was a hint that this was an exhaustion gap, and the downward force would not last too long.

There's always just a tiny piece of the puzzle that is missing. But I'm getting better at noticing these things every day...

15 Comments:

Blogger Trader Mike said...

This comment has been removed by a blog administrator.

6:10 am  
Blogger Trader Mike said...

You've certainly got a lot of guts to post a trading diary to the www from day 1! You've inspired me to do the same (but I've been trading for 4 months now). http://tradermichael67.blogspot.com/
Happier trading next week.

6:12 am  
Blogger Trader Andy said...

mike,

Glad to see I've inspired someone to put their arse on the line too! I'll definitely keep track of your progress and hopefully we'll boost our skills together.

Good luck!
andy

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