February 27th, breaking all the rules

I am not going to post my chart for today as I broke almost every rule that I have and I am paying the price...so I am just going to go over my "what not to do's" for this morning.

I started out the day by making a bit of a guiding plan for my trading of the Global Gold Index funds.

"Price opens high - watch for PP200 bounce on the initial reaction"

This price refers to the index price, which opened up about $8 right off the bat. I figured it might have opened a few dollars higher, but the actual numbers don't really matter.

Price jumped a bit off the start, hit and passed the R2 point. I jumped in short before the line was hit...almost a full dollar out...my rule is wait for the 50 cent range first. Had I waited, the price gapped up $1 or so...then I jumped in long farther than the 50 cent range on the other side. Seeing as I already broke this rule twice and was stung each time...why not do it again? So I jumped in short after the price was lower than 50 cents below the R2 again. Even though this was the right side to be on for the next move, I got in late enough that the small rally spooked me out for a small loss...an earlier entry according to plan would have let me ride the small rally out with more confidence.

These first three trades were not wrong...well, the second one was wrong but one wrong in three would not be bad if I had timed these entries according to my rules.

Had I waited to get short until the 50 cent range was breached I would not even taken the first trade as R2 was crossed, then tested. At this point my long entry could be taken with some confidence except it goes against my morning jotting, but it was technically OK. I would have exited for a very small loss as the price bounced back to R1. As the price crossed R1 on the way down I should have entered short. This was the move that I was looking to have happen in the first place, the bounce off of the R1 as the price closes the over night gap.

The gap was fully closed before noon. I managed to squeeze in a few decent small target trades but continued to break my rules all morning long.

I overtraded, I did not observe patience when I missed a particular indication, I played against a 50sma R1 squeeze, I entered trades too late into the momentum move, I held losers too long, I let winners pullback on me into a loss....I traded on Friday.

Based on the previous days this week I was doing OK, holding my own and learning more of the ins and outs of trading these ETFs against the index.

I am going to try using stops next week to minimize the loser trades...I figure that once a trade has broken into the profit zone I will place a stop order for 3 or 4 cents over my entry price. This will force me to at least get out at a net breakeven point. It is easy to modify the stop order on the fly in order to ratchet the stop up or even just to cancel it in order to place a market order to exit the trade.

I know that VTSOs are not immediately available with Questrade but I don't think I would use them if they were available.

So, items on next week's trading agenda:
- adhere to the 50 cent zone
- practise using the stop orders again
- observe more patience
- let the price run without me if I miss time an entry
- watch the moving average squeeze and don't play short counter trend targets
- stop trading sooner, 18 trades today is too many

Jeff.