Trade DiaryI think with the losses I have incurred I have to have a sit down with myself and ask some basic questions. I think this is a good exercise in honesty and akin to a business plan. So here we go.
Do I think I can make money from spread betting?
Yes, I think it is very possible and consistency seems to be the key to staying in this for the long run. I need to consistently take money from the table and stop giving so much back.
What is my edge?
After one year of trading where I’m back at where I started it’s hard to identify if my edge works but dissecting it a little more I do believe most of my trades were good. The direction of my trades was for the most part good.
My edge is taking a longer term view of the market and scaling into the trade. Say for example I think we are headed downward on the FTSE. I would wait till a good rally occurs and fix entry points where I would start shorting the market using a contract for 3 – 6 months i.e. FTSE 100 March 09. The intention is to ride the momentum till the market has reached my exit point.
Does my edge work?
My trades for the most part have been correct in their outcome. However I have various failings that have led to heavy losses. When I have executed a good trade and left it alone to follow the plan it has worked. When I start interfering and adjusting based on current news I lose the big picture and get stopped out, close or otherwise destroy the trade. I think I need to formulate and write down my trade plan for trades and wait to execute and then leave them alone. I have taken profits too early on most occasions and left losses run. This strategy will lose me everything.
Going forward I will publish my trade plan with exit and entry strategy. This should keep me from changing it as current news should not affect my longer term trade objective.
Where have I been successful?
On the few occasions where I have left my trades to work they have been very successful. My last trade on the FTSE of buying at 3750 was a great trade and if I hadn’t messed around with the stop loss I would be sitting on nice profits. I generally spend weeks building up to a trade then execute well but close way too quick.
Where have I failed?
I leave bad trades get out of control and good ones get closed out for small profits. I execute well and seem to have a necessity to have open trades. I need to master sitting out and watching, the art of Zen trading. When my trades are read I don’t worry because my conviction is sound but once they go into positive territory I start moving stops which always get triggered leaving weeks of work gone. This is an ongoing trend.
What changes will I make?
At this stage its clear my current methods don’t work as I’m over exposed to risk and don’t manage risk well. I need to take more control of managing risk and take a hands off approach once a trade has been executed. I also need to stop opening trades on a whim because I have nothing open. Having no trades open is often a good thing and will save me money. Quick trades just make me a gambler.
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Hi Chris,
Its always worthwhile for a trader to take stock of what’s happened, analyse what is working and not working.
You got the general call right in market direction with your trades when you were shorting the FTSE back in Aug-Sep. Indeed, for all of us the markets have plumetted at a rate faster than many had expected. This allowed you to gain handsomely.
Your predictions of upwards movements is difficult to call as the market ‘adjusts’ to new levels and is skittish (ie: volatile) with large movements to the upside and the downside. I follow the values of the DOW more closely than the FTSE and many were surprised to see it go as low as 7910 or so. Its not far above that now.
Volatility is ‘good’ for a daytrader or spread better as it means that gains can be much bigger. But it is not for the faint-hearted and as you point out, it can stop you out on a ‘missed’ move. But forget about those missed moves, you can do nothing about them. Hindsight investing is a waste of time. The stop-loss is necssary and I’m sure its something you wouldnt trade without.
People will get caught out in these turbulent times, some will make big gains but some will make big losses. I hear that the oil chap Pickens has lost a lot on oil, in Ireland Quinn has lost 1b or so on Anglo Irish Bank, and Carlos Slim from Mexico has lost something like 20 billion supposedly.
Good luck with your trades …..
NoTips
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Regards
Sireena