Day trading report Jan 23, 2008: +$22

[][] Dow opened about 200 points lower today, the news were saying it'd be another down day. But most traders know better. We might be at a short term bottom at the moment because of the Fed intervention. By about noon, the market bottomed out to a new low and started to pick up. The rally went into full gear at almost exactly 3pm (ET) on a rally with little breathing room for short covering. This was quite expected and the signals were clear after the noon bottom.

However, this is where I was caught. My first 2 hours of trading were great. I was up over \$200. Then in the mid-day, even when I was right about the direction of the market, I ended up down about \$350 because of all the choppy actions. In addition, I should be more confident of my belief in a rally because of the obvious uptrend. Yet, the market acted as if it's going to plunge.

As you can see from the graph above, I got into many trades in the middle of the day. But not all of them were losing trades. I saw that the market was in a trading range and profitted from fading the breakouts. That made me a bit of money, but a few bad trades got me into the negative.

I wasn't too happy to see my account under \$15,000 in the afternoon. However, one thing I did well was regain my composure and got back into the game with a clear mind. I had put my lost behind and only strived to minimize risk in my later trades.

Fortunately, near the end of the day, a real rally broke out as expected. I didn't get excited and chased the price. Instead, I waited my opportunity on a retracement and got into a long. That one last trade made back all my loses. Even though my short term entry and exit were ok on this trade. I should have entered another long position on the 2nd retracement for the 2nd longer leg in the rally to double up on my long position. I could have made at least another \$1000 or so if I had done that.

So three lessons from today:

  1. Don't waste my time on low reward trade. Only enter trades if I expect the reward to be a few times (at least 3) more than my stop.
  2. Be careful in the mid-day when only the pros are swimming. Better yet, only trade in first 2 and last 1 hours.
  3. When I am right, raise the stake in the pot! i.e. average up!

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