Aug 262011

I only took 2 real money trades this week.  For most of the week I wasn’t around enough during trading hours.  I did trade on simulator on Wednesday so I could test out some ideas and I did terribly.  After that I was not too keen on trading real money.

Friday I was expecting continuation up but the move down after the open threw me and I scratched my long.  I hate it when those kind of moves throw me for a loop.

So I squeezed out a tiny profit this week, basically from two “scratched” trades.  2 pts total.


Here’s a look at the 10 day average of the day range for the past year:


Note the huge surge in August!  My trading worked great in May, well in June, “ok” in July, and I feel it’s starting to break down in August.  The main reason is stops.  I was using 4 pt max stop prior to August.  The increased volatility in August means I’d need an even bigger stop.  I did use 2-4 pts for most of my trades but I think 2 pts is too close. My tests on Wednesday (on sim) confirmed that.

I don’t think the volatility will continue forever so I don’t want to change my trading too much.  So I’m not sure exactly what to do about this.  So far I did very well in August but I can sense the risk.  So I’m being a bit more cautious and that’s probably why I only took 2 real money trades this week.

So for now my max stop stays around 3-4 pts and when volatility comes back to “normal” I will try 2 pts.

One thing to note:  3-4 pts stop is OK if the winners are 6-8 or more (2:1 ratio).  As long as that’s possible then it’s OK and that’s how I’ve done well this month, going for big wins.

Hope you did OK this week and have a nice weekend.  We only have 4 days left on our vacation and then it’s back to work.



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