It didn’t work today

Posted by Deb | Day Trading Journey | Thursday 4 April 2013 1:20 pm

I tried to work today to trade in the way I described yesterday: not to shy away when the market goes in the opposite direction. If I see a strong indication the market will eventually turn around, instead of quitting the position with loss I will add contracts to “average out” the loss.

I know a wiser way would be to quit quickly with a minimum loss and then enter again in a new critical position. That didn’t work well for me for psychological reasons: After one loss I felt it was a “failure day” and was afraid to enter a position again, or entered a foolish position making a second loss. On the other hand, when averaging out, if the market did turn around I usually made a bigger profit than I would have done just waiting it out without adding contracts.

Today I started out with a good short position. Quite quickly I took 3 pips with one contract, and waited for my second contract to be caught in its take-profit point. Before it got caught the market turned around.

In other such occasions I would at this point take the profit I can and quit. Today I decided to try and wait it out, and averaging with more contracts.

Well, this didn’t work out. The market went up and up. I added 4(!) more positions – something I almost certain wouldn’t have done on live trading, but finally quit when the losses got to high.

After closing the Transact platform and charts, I decided to look again and try to see if opening more charts such as the DAX, could have given me an indication to the market’s rise. Well, I couldn’t. The DAX and the S&P were going up together. What I did see was that the market did build a new critical point, just where my quit the position.

I entered again in a short position in the critical level. Again the market was not going down quickly enough, going up and down, so I finally quit, but this time with a small profit.

Conclusions? Well, I guess the averageing out method is not good, unless you have a real big account and can tolerate waiting out on big losses. Even than you will sometime have to quit on real big losses. Waiting out on the few contracts with which I entered is better, as the loss is not so big, but the chances for loss are bigger as the market will not always turn back strongly enough, at least not quickly enough for my patience. I guess running away in time, with a small profit or small loss is still the right solution, with the conviction and patience to wait out for a second chance.

What can I do when I don’t have the time to sit on this all day? I don’t know. I will be happy to hear from other novice traders for their experience.

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After writing this post I went on to check my eToro account. Great news! My favorite guru (a guru in eToro is a person from which you chose to copy trades) has made a fantastic profit over 3 positions he had been keeping for almost 3 days. Yesterday and the day before these positions were in a bad loss, but the market had finally changed.

What do I learn from this? This person waited out for the market to turn as he predicted. He didn’t give up. On the other hand, he did not add contracts when the positions were in loss. I should probably learn from this. Only I couldn’t wait for so long, due to the leverage I am having on my trades. My account is big enough, so I have to close my positions on the same day. Maybe I should switch to FOREX exchange…

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2 Comments »

  1. Comment by eToro Team — April 7, 2013 @ 5:28 pm

    Hi there,

    Sounds to me like you are simply using a leverage that is too high. If you had lower leverage you could wait it out for the trend to turn just like the guru you were copying.

    At any rate, sounds like you found a really good trader to copy and furthermore, you’re also learning from him – both excellent news! Keep it up!

    Happy trading,
    Andy, eToro Team

  2. Comment by Deb — April 7, 2013 @ 7:20 pm

    Thanks Andy. I really do enjoy my eToro trading.

    In my futures trading there are a few differences from the eToro trading. The main difference is that trading with Transact on futures is actually CFD, i.e. even on one contract the leverage is high if I do not close it on the same day.

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