Tuesday, February 11, 2014

Smart Trading and Dumb Trading

As promised today I will be presenting two real time trades I took.  One simply awesome.  The other simple stupid.  Both show why sticking to the rules is so important and how emotions can and will hurt your trading.  

First let me show you the prep for the trade and take you on a journey through my brilliant mind.  The SPY 60 min PnF mind clearly showed me on the close of February 10 the support and resistance area of 179.97-179.76.  That is step one.  Check.

The next chart is a 15min SPY candlestick chart the a Volume by Price (VP) overlay for the past two trading days.  You will notice that our support and resistance area has the most amount of volume activity.  This is where the accumulation or distribution is clearly happening.  However, we will not know which one until the range is broken.  We get the answer the next day with a breakout above the range on increased volume. This is where going long would make sense. You will also notice how the SPY would breakout of each smaller trading range on increased volume validating the move higher.   So yes that was a text book long trade and makes trading seem like a piece of cake.  

The next trade made very little sense.  It was more along the line of 'If I'm selling my long position I should or short'.  In hindsight I realized how idiotic of a trade this was.  There was nothing on the chart at that point indicating a move lower.  I was lucky enough to get out with a tiny loss after we broke higher once again.  The lesson was learned and cost me little.  I hope this example helps I will be adding more as the trades happen so stay tuned.   Thanks for reading.

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