Allow me to exhume to you my week of worrisome anguish over my attempts at getting into
FAZ at the "right time." My first mistake was attempting to get into it at a "right time," for as a trader, I should know that one of the basic concepts of trading is that there is NO perfect entry or exit point. First, I made a good entry and exit on Monday, catching the entry right off of the positive
VIX transition and the exit right at the negative
VIX reversal. I had been going well for a whole week now on my shorts and longs, hitting
UYM, USO,
GLD, and now
FAZ. Being on top of the world, I attempted to outsmart the market yesterday by getting into
FAZ around $69. At this point, the
VIX had just reversed, and I felt confident that I was on to something. My confidence was quickly side swiped, as I got completely caught off guard during this trade, misreading it completely and having to take a loss. My exit was just above $65.
This upset me a lot, and today, I decided to do something absolutely absurd. Around 2pm, I began my VIX Quest, attempting to outsmart the market yet again. Today, my odds were better, as the volume was a fraction of what it was from yesterday's rally. I entered my FAZ position late, waiting for a rather large VIX breakout to go above the last 5 minute sell candle. The minute the sucker crossed, I fired off my trade, buying at $59. Then I sat and waited. The VIX spiked a quick point, but FAZ went dead weight. Instead of dropping the dead weight and concluding that this VIX spike was somewhat out of the ordinary, I decided to hang out for dear life and ride this one out. Bad idea, as my exit was slightly above $56.
At this point in the day, I felt as if I had been utterly defeated. "How am I losing money in this market? What am I doing wrong?" And then it hit me.
I WAS TRADING LIKE A FOOL.
Yes, you heard it straight from the horse's mouth. Over the past two days during this market rally, I have been questioning this market. I had an 8% gain on the month after Monday, and now I have been slimmed down to around 6%. A 2% loss when the market goes bonkers 6% is absolutely ridiculously. This upset me, and because of this irrational move, my emotions said, "Screw off technicals, I'm grabbing this bull by the horns."
And here I sit:
- TNA @ $12.32, 28% exposed
- UYM @ $9.48, 28% exposed
- Cash, 44% exposed
What do I do now? The market struggled to hold on to an after 3pm gain, and this is normally a bad sign. The VIX spiked from 42.80 at 3:40pm to 43.53 at the close. The $UVOL to $DVOL ratio went from 2.73 to 1 all the way to 1.49 to 1 in the last 15 minutes of the trading day. And I'm stuck bullish because my head got ahead of me. My inexperience over this past week has been quite evident in too many ways.
Because of this, I am taking a 3-Day break period after I close out my TNA and UYM positions. I am also re-posting my trading rules below:
Trade accordingly to what you've lost in the past months: Enjoy your spoils, but look long-term. When you get a trade right, take your profits. When you get a trade wrong, don't wait for it to turn around; just take your profits.You're not always going to be right: Don't be ridiculous. Look at how poorly Warren Buffet is doing right now, and use him as a perfect example of how even the best lose too. Read #1 in order to learn how to deal with that.Watch your technicals closely: Take all emotion out of your trades; if the stock/ETF/iETF is at a strong resistance or support, sell it or buy it (respectively). Don't be greedy and try to wait for the stock/ETF/iETF to bottom out or push higher.Pick a strategy that works all the time: But I thought you just said that you lose sometimes? You do, but that doesn't mean your strategy doesn't work 24/7. Trade with what works with you and your goals of trading (hopefully it's to bank some serious coin) and set up indicators that work with your goals. If you need to, run fake money with it first to make sure it's flawless.When you need days off, take them: It won't kill you to do that. If the market goes up, then damn, you missed a day. The market finds an equilibrium, so if it's up on a four-day stint, don't buy in to snag a couple of easy money makers because you will lose. Instead, wait for the beginning of a downtrend and play the bear card. If you don't like the bear card, then wait for the pullback and then the new uptrend.Profit correctly: What's that mean, "profit correctly"? It means when you make a profit, don't reinvest right away. There's something called opportunity loss in the economic world, and what it means is that when you lose money, you're not just losing a green piece of paper but something more important; a vacation, an enjoyable dinner with your family, a trip to the jewelry store for a deserving wife, or a renovation on the house. Hence, I shall reiterate not to reinvest right away but instead analyze what you could use your profits for instead.Enjoy trading: It's tough to enjoy the market when it seems as though you suck at trading; the reality of it is you don't suck, but instead, you struggle. Enjoying your trading allows you to relax, doesn't pressure you into trading off of emotion and stupidity, and it also allows you to win.Winning is Good: Self-explanatory.
Enjoy the re-post, for these rules are pretty good. Another thing I am going to do during my 3-Day respite is take a new approach on the market: read up on rules, regulations, laws, and of course, trading strategies and other trading guides. Education is ALWAYS a plus and NEVER hurts!
I will also be working with my RSI-FS%K Trading Guidance System, and I will be re-evaluating the MJTT Trading Set-Up I posted back in February. For now, follow those rules above, for they'll help you learn to become a better trader.
Good Night from MJTT.
ZM
good stuff moose. tx