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
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
So three lessons from today:
- 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.
- Be careful in the mid-day when only the pros are swimming. Better
yet, only trade in first 2 and last 1 hours.
- When I am right, raise the stake in the pot! i.e. average up!