WhipItAround.com

Last night I had a dream of the Dow falling 450 points on Monday.  I am short the S&P via 500 shares of SDS, so I hope my dream is a reality and all the a-hole dip buyers get run over.  There is news that Obama is delaying action regarding the “Bad Bank” concept until next week, as he intends to focus on executive compensation this week.  The market does not like uncertainty and I think this could push the mkt significantly lower this week.  

Last week was my best trading week of the year.  It seemed like i nailed every trade with impeccable timing, however, there were a couple trades that were timed poorly, but worked in the end.  Some notable trades were going long 500 shares of SPY on Monday (expecting a positive reaction to the Fed statement) shorting the S&P when the mkt rallied higher after the Fed announcement (exited within a few minutes as SDS jumped 1.50 higher), and bought 1000 FAZ seconds before the mkt closed on tuesday at $39.25 (sold the next morning at 43.75 (closed at $50 on Friday)).  Profits were taken too early on all of these trades and I exited numerous other profitable trades much too early.  This has been a major source of frustration for me and i will be focusing on learning to hold positions longer.  I plan to scale out of trades more often rather than selling everything after a 10-20 cent profit.  For example, if i have 1000 FAZ, I will sell 350 on the first move higher, another 350 near the next resistance level and hold the other 300 shares until a lower high or a lower low is made.

Over time I developed the intuition to sense when the market is about to make a good move (up or down) through a combination of chart analysis and my interpretation of news and sentiment.  Beginning last week, I’ve been trading every thing I see and taking overnight risk.  I found that about 8 out of 10 of my trade ideas work, however, I tend to execute only a portion of those ideas.  I realized that when you have an “edge” you must execute every trade idea without hesitation to maximize profits.  I also realized that you have to expect the unexpected and expect any trade to be a random failure, regardless of your level of conviction.  If you truly have an “edge” profits will be made if the sample size of trades is large enough and every idea/trade is executed.  There have been several times where I lost money on an “edge” I thought I had and didn’t trade my next few ideas only to see them work, which is why the sample size must be large and every trade must be executed if it fits your “Rules of Engagement” (I will post my Rules of Engagement in the next few days).

I want to take my trading to the next level and have been focusing on the psychological aspects of trading, as the stock market is currently one big crazy house and almost completely based on emotions.  I recently read “Trading In The Zone” by Mark Douglas (highly recommended) and I  ordered “The Psychology of Trading”.

800 will be a critical level of support on the S&P.  If the mkt falls below 800, I see a retest of the Nov low.  On Monday morning I expect the dow to flirt with the Friday’s low of 822 on the S&P and then make a move lower.  Alternatively, the mkt could rally up to Friday’s closing prices and then make a break to the downside.