July 15th Weekly Summary - Real Money Account Loss -$77 - Sim Account Profit $553
The Week in Review
The week started out pretty good then late in the day on Tuesday it all went sideways.
We achieved our daily goal of $350 on Monday, but not any any other day of the week.
Next week we will be busy managing the trade we are in, if successful at closing that our we will keep $350 as our daily target.
Real Money Account
Ended the week with a small loss in this account or $77 and holding a short trade, 6 contracts, that is in a negative position of about $7,000.
So, we have to understand how and why this happened.
I believe there are a number of factors that contribute to this.
1. Limited capital in the account
2. The influence of outside noise on trading
3. Lack of confidence and trust in the trading methods
4. Thinking to much
5. Loss of focus
I will walk through the period of time leading up to the critical point in the day when everything went to hell.
This all happened on Tuesday.
The day was going very well I had made 7 trades and was up about $400.
I did a good job of flipping a couple of trades that went against me and followed the mid-morning sell off very well.
Then the market started to rally against the last short position I took at 10:26.
When this happened there were a number of internal psychological factors and outside influences that came into play and I started thinking to much.
Based on market cycles and forecasts that I follow the market is expected to correct sometime between the middle and end of July. This biased me to being on the short side of the market.
Based on my money management / recovery technique I would have needed to take 4 contracts Long to offset the short trade and recover. If the Long trade was not successful I would not have enough capital to flip short again leaving me in a long position that contradicted my short bias of the market.
My target for the day was $350. I had achieved that, relaxed and lost focus.
A belief that the market would not rally with any real strength.
The combination of these factors set in motion a short period of time where I went from neglecting the market, to overthinking it and finally a degree of paralysis from the fear of getting stuck on the wrong side of the market.
What I should have been doing is simply executing according to the structure and rules of the trading strategy and everything would be very different right now.
So, how do I fix this.
Plan B
Plan B is implemented when a trade goes against us and we do not have sufficient margin to take the number of contracts we need to flip and recover.
At our current level of capital that number is about 5 contracts.
Plan B is basically a strategy to bring the Break Even point of a trade back into an achievable level based on the current and anticipated trading range.
We have successfully executed Plan B in the past and I expect to do it again this time.
However, this is the most severe case we have experienced so far in this trading adventure.
We started with 1 contract short @ 2411.25.
As the market runs against us we strategically add positions based on the price activity and levels of support or resistance that are either in place or develop over time.
The market rallied into the 50% Fibonacci retracement level then gave some indication of weakness.
I took 1 contract short @ 2419.75.
This brought my break even point up to 2415.50, a more achievable level.
Unfortunately, the market did not decline sufficiently to reach break even and continued to rally back to the high of the day.
On the close I took 2 more short positions @ 2426.00 which brought my break even up to 2420.75 keeping it above the 50% retracement level of the days range.
The rally continued into Wednesdays trading session approaching historic resistance levels at 2442.
Based on potential resistance and the strategic value of this resistance level I decided to take 1 more short position at 2440.25. This once again advanced my break even point to 2424.65 which was very near the 50% Fibonacci retracement level.
After the early morning rally into this resistance level, the market went sideways for the rest of the day on Wednesday and only made modest gains on Thursday failing to even test the all time highs.
Friday opened looking like a repeat of Thursday, but near mid morning made a decisive break of the record highs and continued to advance making new all time market highs.
Near the end of the day I started looking for signs of a Friday sell off and took 1 more short position at 2456.75. There was no sell of to speak of. But this did bring the break even to 2431.86 which is near the Fibonacci 50% retracement level.
The core philosophy of Plan B is to maintain the Break Even at a level that is achievable when the market reverses and takes back a part of the movement.
This is the same whether in a short position when the market rallies or in a long position when the market declines.
Using the Fibonnaci sequence and the 50% level as a target is logical based on technical analysis and market psychology.
There are certain techniques and strategies that are universally used and /or monitored by professionals that routinely show up as support and resistance levels in the market.
The other factor is that the market will always correct, it is just a matter of time, patience and whether you have enough capital to endure.
In our case we have the ability to add another 4 contracts to fully execute Plan B if required.
Real Money Account Charts
Our account value and ROR did not suffer to much last week.
However, we still have the open trade that is in negative territory.
We will keep the daily goal at $350 for now.
Closed out 1 bond trade this week for a small profit of $375.
I got sidelined on the Sim Account because I was focused on the Real Money account.
On Friday I got back into the Sim account and made $506.
Proof that the system works when it is worked.
Total profit for the week was $553.
Sim Account Chart
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