Wednesday, April 19, 2006

Not so fast...

Day 12 - Wednesday
Total Account Value: $5168
Available Equity: $3430
Positions Opened: 3
Positions Closed: 5

CFD trading must surely be bad for one's blood pressure. Following satisfying gains yesterday, it all disappeared despite closing off two winners, a first since the 7th of April. The problem was due to an opening surge that leapfrogged stop losses on two of my shorts, MBL and CPU. Most of my losses can be explained by this phenomena - frustratingly the stop loss for Macquarie Bank was set at a price that would have given me a smallish profit. The logical solution is to use guaranteed stop losses, in which the price I specify will be the price my position is closed without fail. But I set them so much that the extra cost might get out of hand. Definitely something to look into though.

It looks obvious on the chart now that MBL was unable to sustain its bearishness despite oversold signals and spinning tops/hammers galore on the chart. Even fundamental analysts are saying the stock is overpriced and recommending a sell. Perhaps the falls will continue but I'll have to wait on that one.

I shorted CPU late yesterday as it had made monumental gains of around 4%, despite the weekly chart clearly pointing toward the beginning of a downtrend after reaching new highs. As the price barely moved I watched the depth screen load up with sellers as the bears seem to wrest control back from greedy bulls. My stop loss was placed two ticks above the daily high. I'm sure some pros were on the scene and shorted with very high volume as I saw evidence of their limit orders appear on the buyer side (round figures belonging to 1 buyer).

But today the price gapped open and I lost. This was probably due to the pros who bought back in after a quick kill and the amateur latecomers who saw a big green/white candlestick and placed buy orders overnight. I had been doing OK with the strategy and pre-emptiveness until the close. Another very important lesson learnt. How could I be so stupid?

I closed Centro Properties (CNP) after it gapped up hugely and locked in a quick profit. As I thought, it crashed back down as the gap was unsustainable.

Later on I erred with using a too-tight stop loss on QBE insurance as the MACD indicated a major weakness - a divergence where the price makes higher highs while the indicator makes lower highs. I jumped in just a bit too early as last minute buying pushed it up to new highs before settling back down into a long-legged spinning top. I will only re-enter a short if it begins to fall tomorrow. I hate market indecision...

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