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One thing I have come to recognize is how much inherant "HOPE" is baked into our theories surrounding trading, even those of us who think we're the most disciplined of traders.
An old saying is that there's "No such thing as an athiest in a foxhole", and the same goes for trading, when we are really down on our luck, when we are threatened with some major losses, we tend to "hope" for a favorable outcome so that we don't have to take the loss.
I am ashamed to admit (as I already did in the comments section in the wee hours this morning) that I woke up at 3:30 this morning, worried to pieces about the Big Vote In Germany. Once again, I had this vision of the Dow gapping up 1,000 points and having my profitable quarter killed just hours before the close.
This "end of quarter" stuff is psychological torture. I hate it.
Only seven trading hours to go until the end of the quarter. Just seven more hours.
In any case, the green arrow marks the point where the German government overwhelming passed Euro-TARP. And, gee willikers, you can see what an amazing and astonishing hockey-stick explosion to the upside it made for the Euro. Goodness gracious me, I sure was smart to be worried.
We need to get it through our thick skulls – or at least I do – that:
(a) Greece is doomed;
(b) The Euro is doomed;
(c) The S&P will hit 1050 within weeks;
(d) The Dow will be under 6,000 by early 2013;
(e) All these votes, referendums, court rulings, and rumors are just a total and complete distraction from the steady drip, drip, drip that is going to take place to all assets as they waste away.
Shame on me for worrying. Shame on me.
First off, there are already Halloween decorations and pumpkins going on in my neighborhood. Sheesh!
Anyway, just a quick post to wrap the day up……I had a bunch of new items I wanted to short, but I wanted to wait for a decent price. As the market strengthened (briefly!) rather late in the session, I noticed it was approaching the underside of a broken line. This line wasn't quite horizontal, but it was close, and I literally had my finger hovering over the "Execute" button that would unleash about 20 Sell Short orders. Once the price kissed the underside of the line (circled here in green), I clicked it.
On a different screen at the same time was the IWM, which had a somewhat similar line. This only affirmed my belief that this was a meaningful price level.
Of course, nowhere in nature's law is it written that the price couldn't have cut through both lines and exploded higher, but this is a matter of balancing risk with reward. The risk was lower if I could hold out for the retracement to that line, and being a not terribly patient person, this wasn't easy for me. But, in the end, I'm glad I waited, because better entry prices have two wonderful benefits: (a) better profits; (b) lower potential losses!
With just thirteen hours left in this quarter, I am on the edge of my seat with nervousness, I confess. I'll be glad to open up the bar on Friday. It won't be a moment too soon.
Good night.
About an hour ago, I made a big decision – – to go ahead and cover all my positions for at least the next few days.
This is something I hardly ever, ever do. But there are a couple of realities:
(1) Until the FOMC announcement on Wednesday, there is way too much uncertainty about what Bernanke is going to say. Will it send the market up 500 points? Down 500 points? Nobody knows. I have worked too hard for my profits this quarter to put them up against that kind of uncertainty and risk. I may miss profits on the move, but I'd rather have a sure thing.
(2) This entire Euro/Greek thing is becoming a daily struggle with insanity. At any given moment, if a central banker picks up a telephone, it can send the market flying in either direction. It certainly appears that every morning's big drop is swiftly erased. I'm already glad that I covered my shorts, as I glance at the screen and see the ES is nearly 20 points off its low already.
The quarter ends next Friday. I intend to keep things very, very calm until then, which means either totally in cash or, occasionally, relatively small day-trades.
I may elect to re-enter positions after FOMC, but I'm inclined to wait a little while after the initial spasm before doing so. Today was profitable, the month was profitable, and the quarter was profitable, and I intend to keep it all in this manner.
Bottom line – – my blood pressure is going to be really placid for the forseeable future!
