1-20-16 – Trading Strategy

1-20-16 – Trading Strategy


What I’m in

1/14/16 – DGAZ (Inverse Natural Gas) @ $14.57
1/19/16 – SPXL (S&P 500) @ $66.37
1/19/16 – DRN (Real Estate) @ $65.02

What I’m selling


Sell DGAZ (Inverse Natural Gas) Limit @ $18.00 (23.54% Profit)
Sell DGAZ (Inverse Natural Gas) Stop Limit @ $14.00 (3.91% Loss)

Sell SPXL (S&P 500) Limit @ $70.25 (5.85% Profit)
Sell SPXL (S&P 500) Stop Limit @ $62.50 (5.83% Loss)

Sell DRN (Real Estate) Limit @ $68.50 (5.25% Profit)
Sell DRN (Real Estate) Stop Limit @ $63.00 (3.11% Loss)

What I’m buying

No new buys for tomorrow


Today’s Update

Market Snapshot 1-19-16


SPXL (S&P 500) stop order filled @ $66.37
DRN (Real Estate) stop order filled @ $65.02


Do you know what makes a good trader a better trader? Patience. I have struggled with patience my entire life. I’ve always figured out ways to improve processes or do things easier because I just didn’t have the patience to deal with something repetitive or time consuming. The major reason I took on trading myself was I thought I could earn money faster and better than leaving it in a mutual fund. I have succeeded at that goal.

However, sometimes my impatience causes me to run into things without fully considering what has made me successful so far.

I have tried to be patient waiting for a pullback in these major market drops. The pullbacks always come and I’ve been “waiting” for them for two weeks now.

Also, in market down swings like this, there are plenty of “fake” pullbacks as well which is what happened today. I was watching the futures markets late last night and it looked like we would open up with a large gap across the board to begin our new pullback to the upside.. and we did.. and then it fell right back down.

So what is wrong with that? Roll with the punches right? Well.. no. I had no technical indication this was the beginning of the expected uptrend. None of the downward trend lines I’ve made tracking this movement have been broken, no major pivots have been created and PPO (the lagging indicator I use for confirming reversals) didn’t turn over.

I based my entry on ONE data point, and that is what I saw a few hours before the markets opened. The best way to improve your trading performance is too lose less. To lose less means you have to be strict about your entry and I was being “impatient” thinking I could head this possible move off before my tried and true methodology would have gotten me in.

So far I’m not taking any major losses, but I’m certainly not happy with myself letting my impatience force me into trading too early.

Here is the latest…

JNUG (Junior Gold Miners) stopped out @ $24.00 for a 4.27% Loss

I was chasing for a bottom in JNUG and had no other indications to do so other than an anticipated bounce and a support level. That is NOT how I trade. I need 3-4 reasons which I discuss as part of my B12 Trade Confidence Scale in my Educational Series. Instead I was being reckless. Fortunately I was stopped out for a minimal loss compared to a 14% potential loss for today, so at least I’m not taking on unnecessary risk once I’m in the trade, I just shouldn’t have been in the trade.

JNUG 1-19-16

But things are still going well for my trade in DGAZ (Inverse Natural Gas). I took a text book setup when UGAZ (Natural Gas) broke out of it’s triangle consolidation to the downside, in the direction of the major trend, after a confirmed fake break-out to the upside AND on the day PPO turned negative. That was exactly how I take my trades and should have taken DRN (Real Estate) and SPXL (S&P 500) today. None of those conditions existed but I wanted to be “first” to get in on the rebound. There is a reason generals are in the back while the pawns go into battle first.

So far all the technicals are sound with UGAZ (Natural Gas) pointing that it will go further and if the recent trading history is any significance I should be able to use this one trade to wipe out the dumb trades I’ve gotten myself into and still come out profitable possibly.

UGAZ 1-19-16

What I’m Selling

Sell DGAZ (Inverse Natural Gas) Limit @ $18.00 (23.54% Profit)
Sell DGAZ (Inverse Natural Gas) Stop Limit @ $14.00 (3.91% Loss)

Position continues to improve and now I’m holding onto a 10% gain. We are only on the second day of PPO being positive and prices are above all 3 moving averages. I am going to hold onto this for the maximum gain possible considering the long term downtrend of UGAZ (Natural Gas). I’m not moving up my stop just yet as today’s intraday move put me within pennies of my original order entry. I need another solid day of gains before I will move up my stop.

DGAZ 1-19-16

Sell SPXL (S&P 500) Limit @ $70.25 (5.85% Profit)
Sell SPXL (S&P 500) Stop Limit @ $62.50 (5.83% Loss)

I put in an OCO (Order Cancels Order) assuming we’d get a big opening gap and then it would take off from there. The big opening gap occurred but then we saw an immediate downturn. Fortunately it recovered some of it’s losses and I’m sitting on a small negative position right now. I may have jumped into this prematurely based on what I saw in the futures markets last night. However I did so because I thought it would help me to limit my stop to as minimal percentage as possible. Unfortunately the large gap didn’t push any more momentum for the rest of the day.

SPXL 1-19-16

Sell DRN (Real Estate) Limit @ $68.50 (5.25% Profit)
Sell DRN (Real Estate) Stop Limit @ $63.00 (3.11% Loss)

There were no technical reasons to get into this position today except it was holding at the $64.00 support level and with last night showing a global push across all the markets, this one would benefit. The bears fought a good fight today and DRN closed about where it started from. I’m not going to allow this to go too far against me as I was expecting much more movement than this today.

This was NOT a textbook trade and I wouldn’t recommend anyone follow me when I make impulsive trades like this with no technical confirmations except a hunch on the following open. My impatience waiting for the rebound in this and many markets caused me to read too much into last night’s futures. Being up at 1am making trading decisions probably wasn’t the best idea either. I’m human though, and sometimes we like to prove ourselves wrong from time to time. Winner! I’m wrong. hehe

DRN 1-19-16