Wednesday, August 3, 2011

Market Starts Day Positive, Takes a "Death Dive", Then Reverses Again Reaching The Highs of The Day

Day Traders had a stomach churning session of a day today at different times depending on whether one was long or short in the market.

After 8 straight days of losses, the market was due for a positive day, and that's the way it started out. However, shortly after, it went negative and the selling started to accelerate. It was NOT a pretty sight if you were long. This is one advantage the average "buy and hold" investor has over day traders - they don't have to watch their positions deteriorate with increasing losses with each passing second.

Even with only a relative fewer shares, I was not immune to the big dive without feeling my stomach tighten a bit. CRR had dropped over 10 points from yesterday - so with even less than 100 shares, I was looking a sizable loss for a small trade. Training and practice prevented me from panicking, as I had already planned to buy more shares if the market went lower - I just wasn't anticipating a 10+ point drop in about an hour. I bought a few more shares at my first target area, but that was before the big plunge down. I mapped the next buy target area, but got distracted with other activities and missed making a purchase - which turned out to be at the lows of the day. It wouldn't have made a big difference, as I was only going to add a few more shares in case there was more down side.

So while I was disappointed that I missed getting shares at the lowest price, I felt relieved we were moving back up. CRR grinded up today and did so in such a way as to not leave a clear entry point for adding more shares. It ended the day gaining back what it lost, so the early purchase I made as it went down in the morning became profitable. I was quite happy I didn't panic sell my position at the morning lows which many may have done. My small position made it easier to control the fear factor.

My other position, NFLX, also dived, but it was for less points and I had less than 1/2 the number of shares I had in CRR, the losses were light, especially compared to CRR. However, I screwed this trade up. It started off positive and profitable in the morning, and I failed to cash out when I saw some warning signs. I was so "sure" the market would be moving higher, I ignored them - my "rogue trader" got me again. Eventually NFLX also reversed and I was profitable again, but this time I missed cashing out again thinking it would go straight up. The stock eventually gave the profit back and was meandering when I decided to just close it out as I feared it would be going negative. Of course knowing Murphy, shortly after the stock started moving up again. For my time and trouble, I netted the big sum of 25 cents. whatevah If I had sold when I was supposed to based on my analysis, the profit would have been from $50 - $100. Three words come to mind - bad trade management.

Ironically, I made five trades today and the two I traded badly gained money (but left much on the table) while two of three I did by the book lost money (sometimes even perfect trade set ups don't work).

As for the market in general - the market dive and reversal created a very bullish candle, which may have noted the market bottom - we shall see.