Saturday, February 13, 2010

When To Break My Rules.

On my Friday, Feb 12, 2010 early trade, I entered a trade based on a signal from the 2m chart. During this trade, I realized that I had a rule to only enter based on 5m signals and I had broken that rule. So As price moved up towards the 5m high of prior bar, where the signal should be, I saw that as potentially resistance. So I decided there to kill the trade since I am really dedicated to only trading the plan. I had problems earlier not trading the plan and being disgusted with myself regarding that, I really wanted to stick with this change. Blogging is a part of this. Here is the link, again, to Dr. Brett Steenbarger's blog regarding disgust: I wasn't thinking clearly enough to realize that if the 5m prior bar hi was broken, then this trade was fine, since I would be in at the right place. I exited on the kill with only 2 ticks gain, but of course, price moved up 10, and then paused and then 10 more points for something like a 20 point gain. Not a total loss, since this confirmed to me once again, that I am able to find a good entry. I wasn't able to move fast enough to re-enter, I also take extensive screen captures to make slides of my trade so I was distracted.

The interesting thing that happened on the same day, was the formation of a setup that I did not enter on the 2m trigger, but waited for the 5m trigger and took it. This time, however, the move from the time of the 2m trigger to the time of the 5m trigger was a really good move and, btw, it would have helped me on my mistake I made in this trade, if I had actually entered on the 2m trigger. So after the trade, I analyzed the charts and realized that there were enough internals at the time of the 2m trigger that were strongly supporting that entry. By the time of the 5m entry, the market AND internals were ripe for a wiggle or minor retracement. What this means, is that the 5m entry, no matter how good it was, had a location of the technical stop that was wider, much wider than the stop location based on the 2m trigger and the 2m was actually better. This leads me to opening up this rule and allowing greater discretion regarding this part of the plan, 2m vs. 5m triggers.

My mistake was using the wrong stop location for the 5m entry. It happened to be the amount that was enough for the 2m stop, interestingly. So I had an arbitrary stop rather than a technical stop and it hit right at the very peak of the minor retracement/hop/dip/pause/wiggle before price followed thru to my intended direction that I had analyzed correctly, and btw, worked for hours waiting for, stalking the market, to snipe it at the best time, which actually was the best time. So that was the one thing I did well, enter. My pattern of errors here is in the management, not entry, so at least I'm improving something.

In conclusion, I now give myself the option of the 2m entry only if it makes technical sense in price pattern and internals.

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