Home > Journal, Uncategorized > Week in Review: September 28 – October 2

Week in Review: September 28 – October 2

This week I sat on my hands. However, I still managed to grow my equity by 3.78%.

I chose not to make any trades because the market looked very indecisive these past few weeks and I wanted to wait for a confirmed trend. In hindsight, most of September’s erratic market behavior looks like topping action. Now the S&P has a confirmed downtrend.

Towards the very beginning of September, when spy broke down under 100 from 104, I started a short position. I did this by buying SPXU (the triple leveraged inverse S&P ETF). Now that I look back on it, it was the wrong time to start shorting the market. That’s easy to say now because hindsight is 20/20, but there was no confirmation of a trend reversal on the SPY daily chart. I continued to make rookie mistakes throughout September by averaging down as SPXU plunged from $54 to $42.50. It is almost painful to write that, because I know that it was a mistake. In fact, I knew it was a mistake as I was doing it, but I made the wrong trade again and again by averaging in about five times. The recent drop is different from the drop in the beginning of the month in that we have a lower swing low followed by a lower swing high (see Thursday’s post about the drop). I will continue to add to my short position as long as the SPY stays in its downtrend. If the market turns north again, I plan to drop this short position (for real this time).

Some of the lessons I learned so far in this SPXU trade:

  • Cut your losers fast (if it is a winner, then give it room to run)
  • Do not average into a position unless initially planned for (averaging a loser is a very bad Idea)
  • Follow your risk management parameters and do not let your position size get too large (this only leads to stress and exposes your account to increased draw-downs)
  • Wait for the trade set up to be confirmed (being early may be enticing, but will often prove to be a big mistake)
  • Do not fight the trend (you will not win)
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  1. October 4, 2009 at 8:57 pm

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