Story of a bad trade and a missed opportunity

The market took a big bite out of me this week just as when I am not giving it its fullest attention. I took a short-side trade in Manulife Financial (MFC.TO) last Thursday simply because of a price pattern. I did not seek to confirm my hypothesis with short-term price action and intermarket analysis like I usually would because I've been so consumed with setting up my trading system on the cloud. I became careless because of my recent win streak and my involvement in so many matters. I lost my focus. My short in Manulife Financial (MFC.TO) is deep in red as of this writing. The market gapped above my stop loss price over the weekend and never eased back for me to exit at my stop as planned. I've placed in a limit order to target a retracement to \$14.50 because there's not much left to recuperate if I dump my position now. MFC.TO is well above \$15, so I am prepared for the worst. Judging by the volume, this looks like a valid breakout too. At least my put options don't expire until January. If my puts expire, this will be a loss of \$372 + \$9.90 commission = \$381.90 = 3.9% of my RRSP account. To put this into perspective, according to my trade log, this may become my biggest single loss in a trade in this account. Three folds greater than my previous biggest loser at 1.23%. Ouch!

[caption id="" align="aligncenter" width="570" caption="Manulife Financial (MFC.TO)"][][][/caption] Manulife is only half of my blunder this week. The real killer is in Ventana Gold (VEN.TO). As you may recall, I have been very bullish on VEN.TO. In fact, I've been stalking this gem for months by nibbling on small bullish positions to test the water now and then. Just as when I dug myself into a hole because of this extended loss, VEN.TO launched off on a rocket (Fig. 2). I am just staring at its takeoff outside the fence without the ability to take a position because of my self-regulated risk exposure limit. There goes a few weeks of research and analysis out the window. Double ouch! [caption id="" align="aligncenter" width="570" caption="Ventana Gold (VEN.TO)"][]1[/caption] As bad as my trading can be, at least I am adament with my risk management and traded within my limits. A 3.9% loss in a trade is horrible, but it's not catastrophic. I will survive this one, redo my research, regain my focus, and be able to fight on another day. This is what trading is about.

Sold 300 HOD.TO @ 9.12, Loss -0.6%

Update: Crude is making a dive. This might be the move that I waited but got stopped out. I shorted crude oil on Friday afternoon below the 82 resistance. It was an undocumented trade. Now I am closing at a loss. It's a slap on the hand for breaking my own trading rules. Oil broke above 82 over the weekend. Fortunately, the opening gap was filled before noon and I took the opportunity to cover my short. I was down 1% at the open. Good thing I didn't panic and waited patiently (with a hard stop just below the opening low) for a more rational exit. My planned stop was \$9.15, the opening low was \$8.87, and I covered at \$9.12. Just a tad under my plan but a lot higher than the low so far. Figure 1 is a chart of U.S. Oil Fund (USO) at the time of my exit. I traded the Horizons BetaPro Oil Bear Plus ETF (HOD.TO) as a vehicle for shorting crude oil. The chart of USO is a better proxy of crude oil prices as it's a few magnitudes higher volume (i.e. more popular) than HOD.TO. From the looks of it, I will stay on the sideline until at least the midterm election in the United States next week. Loss for this trade is (\$9.12 - \$9.29) * 300 = -\$51 - \$9.90 commission = -\$60.90 = -0.6%.

[caption id="" align="aligncenter" width="570" caption="U.S. Oil Fund (USO)"][][][/caption]

Posted 25 October 2010 in stocks.

Bought/Sold 250 TCK.B.TO @ $34.10/$33.68, Loss -1.2%

What I thought would be an intermediate term hold turns out to have lasted mere minutes. I bought Teck Cominco (TCK.B.TO) after a small bounce at \$34 support during lunch today. Figure 1 shows the clear support level. Also note the fact that my recent shorts haven't been working, so I thought I would go with the flow and go long. [caption id="" align="aligncenter" width="570" caption="Teck Cominco (TCK.B.TO)"][][][/caption] However, the market edged lower almost immediately after my long entry (something I haven't done in a while). TCK cracked the \$34 support swiftly to \$33.80, my mental support. My alert was sounded and I kept an eye on it afterward. But then not long after \$33.80, my hard stop at \$33.70 was filled and TCK traded down to \$33.66 or so. It has now stabilized around \$33.80 as of 2pm. Figure 2 shows the intraday chart of TCK.B.TO. [caption id="" align="aligncenter" width="570" caption="TCK.B.TO intraday chart"][]1[/caption] Loss for this trade is (\$33.68 - \$34.10) * 250 = -\$105 - \$4.95 * 2 commission = -\$114.90 = -1.2% of account. My account is now experiencing a 3.4% drawdown since the high on June 8th. I can't help but feel that this was a stop hunt. TCK is creeping higher at the moment. However, as my initial position was stopped out, I am not going to re-enter this trade just yet. Let's see what it does near the close today. I am labelling this particular trade as a bad trade because my stop was clearly too tight based on the time frame that I am observing. I should have reduced my position size and widened my stop to account for the recent volatility. Update: TCK gapped down 7% the day after. At least my exit was timely.

Posted 28 June 2010 in stocks.

Sold 4 MFC 10OCT Puts 17.00 @ @1.43, Mark $16.27, Loss -0.5%

Not much is happening in the market as it is trading in a tight range. This is not good for my options as the time delta will slowly eating away my premium. So I've decided to unload this position at a small loss just now as the market is testing support across the board. The U.S. dollar index is testing \$86 resistance. Oil is testing \$78 support. S&P500 is testing the 1070 support zone. Purchase price for these puts were \$1.48 per contract last Wednesday. When Manulife Financial (MFC.TO) was trading at 16.38. Loss is (\$1.48 - \$1.43) * 100 * 4 = \$20 - \$13.95 * 2 commission = \$47.90 = 0.5% of account. As you can see, the commission is horrible on my RRSP trading account at Questrade. I will wind down trading options from now on and move back to trading forex in the summer. My live account at Dukascopy is ready... Update: The market finally broke support the day after this exit. This was not a good exit as I lost patience. MFC is testing \$16 support on June 29th opening hour and I don't expect it to hold. This could turn out to be a winner if I had held.

[caption id="" align="aligncenter" width="570" caption="Manulife Financial (MFC.TO)"][][][/caption]

Posted 28 June 2010 in stocks.

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