Tuesday, September 28, 2010

Trading decisions and emotions

Since I have already posted my thoughts on the intraday reversal earlier today, I thought I would just do a detailed post on my trades today. I have gone in detail about the rationale behind my each and every move, some potentially right and some potentially wrong, today.

I took a position in BVN, a peruvian gold miner, at 42.80, which happens to be today's Chart of the Day. This buy was based on the momentum behind gold miners today in general, and the consolidation in this stock in particular. Since I have gone in detail about this particular stock in Chart of the Day post,  I wont repeat myself here.

The next trade I made was a position in NR at 7.95, a stock that was down over 7% today. Now, this is not the kind of trade I usually make. The regular readers of the blog know that I usually go with momentum plays. The logic behind this move can be seen from the intraday 5 minute chart below.

After a sharp drop at the beginning of the day, the stock consolidated for a long while around 7.95. Like I said this wasn't my typical play, but having traded this stock very often before, I felt quite comfortable going into it. But the most important thing in this trade was that due to the narrow consolidation range, I was able to keep a very close stop, so I wasn't really risking much. I like the way this closed, but this is meant to be a quick play and I will look to get out of this at the first opportunity tomorrow.

The next move I made was selling half my overnight AGCO position for less than half a percent loss. Why sell a stock in loss on a bullish day like today? Well, after the above two buys I was well into margin now, so I decided to reduce my exposure to the markets a bit and thus, I decided to cut off one of the laggards. One of the selling rules I try to adhere to is as follows. Whenever I know that my exposure to the market is such or there is a particular position that will keep me worried at the end of the trading day, I sell it. No charts, no analysis. You just cant put a price on peace of mind.

In the beginning of the post, I said I made some good decisions and some bad. Now let's come to my last trade of the day, one that I think I will regret. Close to the end of the trading day, I realized tomorrow was the last trading day of the month. This is one of the best trading months I have had (more on that tomorrow), and I suddenly felt this need to protect my profits. Even after the last sell, I was still on margin. I decided to sell my GSM position for 4.7% gain. As you can see the chart looks really good despite the negative MACD divergence, and I believe it still has some upside left. I am not too proud of this decision as I let my emotions get the better of me in this one.

I rather enjoyed doing this post as it was kinda therapeutic in nature. It turned out to be quite a decent day for me in the end. Next time, I will do a similar post when I have a frustrating day. You know, one of those day, when you can't help but feel that the market is out to get you. Hopefully, I won't be writing that post any time soon!!

Take care and good luck!

P.S.: As Chris rightly pointed out in the comments section below, tomorrow is not the last trading day of the month but the second last one. Just don't want any of you readers to get it wrong like I did!


Chris said...

"I realized tomorrow was the last trading day of the month"

Hopefully that is a typo, because tomorrow is the 29th. POMO/walkaway Thursday will be very interesting IMO, especially with hedge funds defending vs redemptions, and GDP 3rd estimate due out at 830.

positiontrader said...

No, that wasn't a typo as that's what I thought at that time! Well, close enough to the end of the month then. lol. And yes, I will look to sell some more before the GDP estimates.

Thanks for reading!