Last night was another example of take profits when you can. I am certain that the FTSE 100 will break the 4000 barrier and have been building up a substantial short on this expectation. Last night I went from +500 Euro to a loss of -1000 in minutes. My reasoning for not taking profits was because I have a nasty habit of ill timed exits. Waiting till my exit point has come was one of my new years resolutions and so I’m happy I’m doing it. On the other hand I would be happier with 500 quid in my pocket.

The reason for the rapid market move was the government’s announcement to subsidise troubled homeowners mortgages. This caused the S&P to do a nasty U turn and jump 3% from heavy losses. The DOW came back from -200 to break even. Today’s session will tell if the bulls have legs but as we are maintaining the trading range it will be hard to see us break this unless we get further announcements.

I will be incrementally adding to my existing short and this rally could reach 4400 before it’s finished. I’m happy with my current position and because I have this though through I believe its a good trade. My stop is at 4700 and is very wide. As I increase my position I will be taking small profits on those shorts opened at lower levels, this should mean I can get better entry point but maintain the position size.

I hope no one was caught out in the squeeze. Risk management and well placed stops

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