Couldn’t Sit Tight

I had run out of patience in this market and could not sit tight today.  According to Jesse Livermore, this is how one would beat himself.  Here’s a living example:

I saw a tweet about DMND down over 20%.  I looked the chart and the “get lucky” mentality crept in.  Wow, the day before the same stock went up 50%.  With this kind of volatility, I might just get lucky.

I saw the price hugged the down trend line in the morning, but I did not set any buy stop — which was probably the key mistake.  Suddenly, the price rocketed out of no where, even over the morning high.  At the point my mental state was totally out of balance, bummed to be exact.  I resented missing the huge move, so as the next bar broke the morning high (see 1) for the second time, I hastily entered long and set a VERY modest target.  The intent was just for “psycho-therapy” for missing the rally.  As jinx would have it, my target was 2 cents shy from being reached!  (This had been a recurring scene by the way — 2 cents shy from taking a green only to have the price reverse into the red territories in a hurry.)  No stop was placed because I thought it was a quick 10 cent scalp in this volatile stock.  The price dived and I was trapped.

The price then consolidated and I became hopeful and actually doubled down the moment price showed the first sign of breakout (see 2).  It quickly reversed and sold off.   It was a disaster costing me about $300 when I finally took the loss on the backtest of the 20 MA.

I should have quit for the day because it was obviously not my day.  But instead, I lost discipline and wanted to get even.   This was another big mistake, violating another old lesson.   I got caught shorting during SPY’s closing spike and incurred another $100 loss.  See 3 below.  As soon as the break-out of the OR (blue line) failed, I entered short.  And thanks to the jinx once again, this had to be the time that prices broke out of the rectangular trading range.   The stock went higher into the close with increasing volume, indicative of a possible green gap tomorrow.

With SPY down over 1.5%, my portfolio only gained $1,100, thanks to my disastrous day-trading folly.  It would have done $400 better had I just sit tight and kept my disciplines.

Portfolio Value: $128,900

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2 Responses to Couldn’t Sit Tight

  1. GreedyKojiro says:

    David,
    For me front running the market is less dangerous than chasing the market. It’s simply that when I decide to front run the market, it’s part of my plan. Mentally I’m prepared. If it doesn’t work out the way I want, I have plan B. However chasing the market is toying with my emotion. I’m rushed in without having any plan. And when it doesn’t turn out the way I want, I’m desperate and lost. It’s bad practice. I have learned not to chase the market from Jeff White, founder of thestockbandit.com. He said “The most important thing for being a good trader is not about winning or losing the game, but it’s being confident. Once the confidence is lost, even with the best setup, trader can’t pull the trigger because he/she was scared.” Can’t agree with him more.
    Just my two cents and I hope you well!

  2. I totally agree. I have been afraid to pull the trigger these days. I’m also finding out that the Al Brooks’ techniques tend to cause me to “chase” the market. The real me is like you, set a limit order for entry at point of support, instead of a stop order on breakout. But you know what. Over time it didn’t matter which approach I take, somehow I’d get screwed. I hate this market.

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