9/11/08

Let me first send my thoughts to all of the people involved with 9/11, let us never forget on this day of the year.....

Well, I am officially back from vacation to the mainland U.S., and am ready to rock and roll. For those of you that are following along, or have been waiting for responses to emails, thank you very much for your patience. Things are now back to normal, and I will be returning my regular schedule.

I made one trade today, based on the R-Level reversal indicator from the JS Services pricemaps. Today was a fantastic lesson in patience, and allowing 'the market to come to you'. One of the MOST important aspects of trading support and resistance is patience. These significant levels act in many ways, but they can be deceiving, causing the trader to jump and be early if emotions get in the way. Do you ever find yourself feeling anxious or nervous in anticipation of a trading signal that you perceive to be setting up? I know I do, but I also know that it is quite normal, and very controllable. Half the battle is simply being mentally objective, recognizing this emotional signal, and adjusting your mental energy so as to compensate for whatever potential errors in judgement might arise as a result of falling victim to such an impulse.

Today's trade log is as follows:

Buy to open 20 NDX Sep 1675's PUTS @$6.50
Sell to close 20 NDX Sep 1675's PUTS@$7.00

This trade was extremely short, since the market was really whipsawing and in a sort of digestive trading mode. I expect significant range movement in the next couple of days to weeks, especially when you see several days of consolidation/'spinning tops' candle bodies on a chart. Take a look at the daily charts for $SPX, $RUT, $NDX, $DJI, and you will see similar trading patterns for the last several days. Something is brewing, and most likely will result in a significant move which should direct the next couple of week's trading. Financials, FDIC involvement, FED issues, Treasury issues, and a litany of other market influences are causing a great deal of uncertainty and pain on Wall Street, expect a reaction, and be on your toes! In environments like this, I LOVE scaling into and out of positions, and taking very quick profits. If you trade for a living, you must make money to survive. There is most definitely a difference between letting your winners run and taking profits too soon, but nonetheless, there is ALWAYS something to be said for paying yourself along the way as the market makes money available to you. I bring this up because my trade today speaks directly to this issue. When I perceived that today was likely to bring a great deal of up/down movement in a tight range(we did eventually breakout for a small short covering rally), I set up my trade entries/exits with this in mind. I took a larger than normal position of 20 contracts, but I used the same signals, methodology, and information that I always do to make trades, keeping in mind that I was going to take profits as the market made money available to me. Using a larger position size in combination with a normal position size strategy requires emotional control and discipline, but in the end will handsomely reward any trader following their rules properly. Realizing that it would likely be dangerous to look for a several dollar move in regards to the value of my option's price(my normal profit target), I doubled my position size upon receiving a high probability trading signal and made sure to cut my normal profit target in half. What this allowed me to do is remain calm and centered, not responding to the fact that I have a significantly larger than normal position trading, and only concentrating on the information the market is putting out in regards to whether or not my trade is working. Let me also say that I only use this strategy when there is a combination of certain market conditions (as they were today) and my most reliable (on a probability basis) trading signal. All of these factors come together to create a trade that is rigid, quick, low-risk, and substantially profitable if and when the market moves in my direction. I normally would limit this type of trade to a 5-10 minute span in which I allow the trade to develop. If nothing comes together, I cut it, and move on to the next signal. In this case, the market took about 6 minutes to move in my direction, upon which I closed the trade, and was done for the day. I left money on the table, but I didn't take a whole of risk and I didn't become greedy, so the fact that I did have a nicely profitable trade in this trading day's particular environment is very positive.