Market gives and market takes- The cycle of (trading) Life

And this is the market truism I live by.  At least, it is my market truism.

With great eager, market walked down DDD and slapped me on the face this morning.  And what did you do when a 500 lbs gorilla slapped you?  You run away as fast as you can!  And so the market took back what I thought was a nice profit from yesterday run-up on my beloved DDD.  Did I just say “beloved”!  Holy Shit!  So that was what happened.  I was momentary in love with my DDD and forgot to lock in at least half of my profit by putting a stop at mid-point of yesterday bar.

Well, once the low of yesterday bar was taken out, the pain on my face became very real so I bailed.  If there is any candlestick bar I dislike the most when it is against me, it is the BAD ASS ENGULFMENT BAR.  When I see bar like this against my position, I run.  I will run like there is no tomorrow.

A lion share of yesterday profit of DDD was taken back by the market; just like that.

Market gives and market takes!

Sure, with hindsight, some of you might say that I bailed out too quickly.  You didn’t let the day to finish before calling it the Bearish Engulfment bar.  Well, excuse me.  It is exactly because I believe in the market truism (see subject heading) that I’m not going to “wait” for the market to take more than I was given.  In other words, market can take the paper profit that was given me; but I’m not going to let it takes my hard-earned cash that was converted from paper profit before.  Once I converted paper profit into cash; this cash belong to me.  And I will play defensive in anyway to protect my cash.

If I lost money due to stop losses; then that is my business expenses I’ve to pay out of my cash; but if you let a paper profit turn into loss (especially when it was a nice decent size profit), then you are killing your business.  It is akin to buying your customer a gold watch for stringing you along with the promise of a deal and then left you high and dry ’cause you were just being used to get a better deal from another seller.   Who does business like that?

Folks, hindsight sucks!  There is no need to wallow in our self-pity for not being able to call the top or bottom.   First, we are not blessed with the power of precognition; so why are we beating ourselves up after we close our position or miss an opportunity?  Is there an almighty being scolding you for not using the power of precognition that you possessed to make perfect market timing decision?

DDD is now up a point from where I sold and WPRT is up 2 points after I sold.  Big F**king Deal!  Yes, I was away from my desk so I didn’t have a chance to reconsider going back in like I normally will do.   But giving the way the market is behaving right now, I’m not going to buy back DDD or WPRT yet.

Btw, I missed the whole AAPL rise to the moon; so did I cry about it?  No.  Why?  ’cause I was never looking at AAPL at a trade.   So, why should I cry about the missing gain for DDD and WPRT when I was no longer in the trade?  Ok, maybe “cry” is too strong a word; how ’bout- why should I feel bad about missing the gain that I “could” have?

Did you see how ridiculous it is when you stop for a moment and think about this.  Say, you just open a broker account for the first time and is very eager to invest.  You look at all the charts of your favorite stocks you have been keeping an eyes on.  Obviously, there is a lot of charts with uptrend or downtrend and you are looking for an entry point to get in.

Wait!  Stop right there.  While you are looking for entry point, do you feel bad (if not crying) that you missed all the uptrend you saw on the chart?  No?  Why should you?  You just open your account!

Then why should you feel sad (if not crying) that you missed the trade based on hindsight after you got out?

The point I’m trying to say is that whatever decision you made at the time of the trade is based on information, the risk tolerance, and your mental condition at the time.  Once the decision is made, the whole trade is OVER.  The only thing left is a lesson to learn.  And the ONLY thing to do is to look what is in front of you; not behind you.  BE that guy who just open his broker account for the first time and look at the whole market with a fresh mind.

Am I off the tangent in my post here?  Nope!

Market gives and market takes.

Just remember this, the gains that you thought you missed by getting out too soon; the market could easily take back.  Just like my DDD paper profit.   Once you accept this truism, you will then be able to look at the market with a fresh mind every single time you close a position (with loss or gain).

Market gives and market takes, it is the cycle of life in the trading market.  Our job is to prevent the market from taking back too much.  And to do that, you have to play defensive even when you are on the offensive.

Despite my getting out too soon today, I’m still up 15% for the year.

Current cash position: back to 75%.

Good Hunting!

 



Categories: Trading philosophies and thoughts

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