Aug 172011

As I’ve written lately, I’m avoiding fading unless it’s with the ‘trend’ (either intraday or the value area trend from MP chart).  So I really disappointed myself when I took a short today right after the open.  The VA direction is clearly up (even if yesterday was just a few ticks lower than the previous day, it’s still overlapping in an up trend) and the day’s direction was up.  So why did I try a short?  I really can’t explain it.  I just broke down.

And reading the trading book I’ve been reading, I am thrilled to see I’m not the only one!  Peter Brandt writes about trades that weren’t in his plan and even says that he’d be more profitable if he skipped certain subsets of setups.  Wow.  A professional trader who has problems trading his plan strictly.  I love the humbleness of his book and I can’t recommend it enough.

So back to my trades..  I will not beat myself up over it I will just accept that it happens and journal it and work to prevent it or at least reduce the number of occurances.

My first trade stopped out -1 pt.  My second was good for 2 pts.  So I finish +1 pt for the day (times 2 contracts).  I wanted to hold my short for a gap fill (my original plan) but I realized I shouldn’t have been in the trade at all so best to exit it and learn my lesson with a small profit.


  5 Responses to “Why did I fade?”

  1. gone through the exact same thing myself, all i can say is good thing your short did not workout in your favor.. nothing worse then making good money off of a mistake because it makes it that much easier to break your rule next time! tossing it in a journal if you don’t always go back to read that day isn’t as useful as having a piece of paper posted up somewhere beside you that says “DO NOT FADE” you’ll always be able to see that, just a thought! also what book?

  2. romatrader – i probably wasn’t clear in my post but I took two shorts, so it did work out. and as I write this the market is looking weak. i think sometimes intuition is right but the trading plan is there to protect us from when it’s wrong, as it often is when fading.

  3. Oh just the part at the end where you posted “realized I shouldn’t have been in the trade at all and learned my lesson with a small profit”, I have just noticed that the mind doesn’t remember certain days to well especially when everyday in the market is so unique that’s why just threw the suggestion out there to have it written somewhere beside monitor. cheers

  4. “I will not beat myself up over it I will just accept that it happens and journal it and work to prevent it or at least reduce the number of occurences.”

    I think that this is a 100% correct approach. It’s simply about making less and less mistakes over time. We are human, so our edge over the trading machines is always offset by our psychological shortcomings. The goal must therefore be to minimize the latter without affecting the former too much – my point is, if you say “from now on I never make a mistake again”, you might as well write yourself an algorithm and let it trade. Your edge is your market understanding, experience, and intuition but it comes at a cost – that of human mistake. I think that this is a dilemma of discretionary trading and one which can not be solved to the end. But, and this is the good news, we don’t need to solve it, we can embrace it and make it part of our plan. In planning for our mistakes (through stops, max loss limits, max number of consecutive losses, etc.) we are allowing ourselves to be intuitive and are creating a safe zone in which we can perform.

    You made money on those shorts. This means that you were not completely wrong. The money is not important, what is important that something was there, you saw it, and you acted intuitively by taking the trade. Perhaps it was not the best trade but, it certainly was not complete mistake either. You realized it, and closed it, another intuitive (and correct) decision.

    I’d rather make a mistake from time to time and use my intuition to my fullest advantage than eliminate every mistake from my trading and destroy my intuition along the way.


  5. Great comments Benko. In this case intuition was right but we agree long term i’ll do better sticking to my plan whatever my plan may be. That’s the thing about a plan – it doesn’t have to be perfect. One just has to follow it and adapt it as necessary.

    Thanks for sharing your thoughts.

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