Thursday, April 06, 2006

The market takes its revenge

Day 5 - Thursday
Total Account Value: $5924
Available Equity: $4805
Positions Opened: 5
Positions Closed: 8

The mistakes of Wednesday came back to haunt me this morning. I was pleased with my account balance but something seemed a little wrong. I had made a few silly mistakes that should have had a greater impact on my bottom line.

This morning my positions in ASX and STO delivered their final blow. Stupidly, upon noticing the market shifts I refused to close my positions, holding on to some faint hope that I might be presented with a golden exit opportunity. There are no fairytales in trading. Both gapped open above my stop loss levels, leaving me with greater losses than my pre-determined maximum limit.

The double blow was accentuated when CML suddenly decided to break towards its 12 month high yet again, blowing my profit out of the water. This despite all signals on the chart, stock depth screen and technical indicators. I should have been patient with my original call on Monday to go long. But "should haves" and "could haves" is for suckers looking for excuses. There are no excuses, just circumstances.

The disastrous opening half hour reminded me that going short in a bull market is risky business. If anything, shorts should be held only for the very short-term and only after confirmation signals are seen. I'm definitely jumping in too soon.

The second mistake was not to immediately reverse my decision after being stopped out and go long. Taking the losses made me a little gunshy and as so much was was happening, the last thing on my mind was to get back on the saddle. ASX ended up surging around 6% for the day. Looking at how the chart formed and the recent bullishness of the All Ordinaries, the result was not a complete surprise.

Not too long afterwards the day got worse. NAB and ANN (Ansell) had been meandering around unpredictably for the last week or so. Because of this, I haven't been paying a whole lot of attention to them. Trading in them therefore was a big mistake. NAB had formed a loose "teacup" pattern, typified by a double-tested resistance line over a length of time. It was starting to look strong and broke over resistance so I bought at $37.88. Not too much later it turned full circle and hit my rather loose stop loss.

ANN's positive divergence into new territory abruptly ended as buyers and sellers seemed to go "schizo". As I watched the candlestick bob up and down like a pogo stick, my stop loss was hit, making it 5 losing trades in the day! ANN has been acting very bizarrely lately, so I have no option but to remove it from my watchlist.

The remainder of the day was spent closing off some winning positions. Partially because they were starting to look out of steam and partially because I grew a touch nervous. CPU ended well for me - up $209 after brokerage and interest.

So in the end, most of yesterday's gains were eroded today. That's just the way trading goes, and its something I'm quite comfortable with. I'm actually glad to have experienced such chaos and negativity in my first week, as it was a valuable lesson.

Patience, composure, conservatism and a lack of hesitancy are critically important trader attributes.

PS: At 3:45pm today I had a little deja vu. My just-turned-18 year-old cousin entered my room unexpectedly and started blabbing about teenager stuff. "Now I can finally buy alcohol...last time we got Johnny to buy us chick drinks....he is such a fag..." The bizarre contrast with yesterday is just too funny...


Anonymous Anonymous said...

I was with Big T for 14 years administering Intelligent Network platform and providing Level2 and Level3 support for Inbound services (13XXXX, 1800, 190). When I left I have over 1500hrs of sick leave accumulating which was not cashable!! Which goes to show it does not pay to be dedicated to the firm you're with.Your superiors comes and goes and in the end you're just a number.

I was lazing for 16 months until at the beginning of this year decided to enter the job market. Have still to be called up for an interview. Quite depressing.

I thought I could make a living investing in shares. I didn't qualify for any handouts from Centrelink. However any gains was slow (partly Rosella technique). Thus I decided to try CFD for ASX200 which causes me sleepless nights as there is practically non stop trading on indices. After 5 months and loosing BIG money I have stopped CFD. Although I still do Margin loan trading on shares. Like your yesterday experience I was shorting ASX200 when the market is bullish.

Note that CML is going ex-dividend soon and might by why it's bullish.

J King

4:03 pm  
Blogger Trader Andy said...

1500 hours sick leave...incredible! I had the opposite problem at my last employer - I went down with glandular fever and as I had used up my 8 yearly sick days, I was forced into unpaid leave.

My dad is actually going to change direction and do outdoor work, such as gardening or handyman stuff. I'm not sure of your background but it seems a nice alternative to the corporate life.

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