January 14th - Mike loses his head

Howdy campers.

This will be a brief post because I have to go night skiing in a few minutes (life in Vancouver is awful, by the way).

As mentioned during January 13th's post, I went to bed last night dreaming of daily 2.5% returns. I was holding a position of 300 TSYS which had performed as expected in my first day of trading. I awoke in time to catch the opening of the markets - that's 6:30 am here on the West Coast.

Lo and behold, the markets opened sharply down. Macro-economic forces were reeking havoc on stocks indiscriminantly. TSYS fell below my support level and I hesitated. I thought, "Hey, it's not the stock, it's the market. My stock is still a good one." (ego!) So I held, expecting a bounce. The bounce came but by that time it was too late - I had already sold on panic (emotion!). I exited at 7.36. I was satisfied to see if fall even lower to 7.26 before reversing course.

Meanwhile, I violated another pledge of mine by deciding to try and take advantage of the inevitable bounce so many stocks were going to take during the day. I was suddenly going to day trade and make some of my money back. In retrospect, I guess things could have turned out worse.

Using various market scans I found a few stocks to watch. Shortly after 8 am local time (11 market time), I identified a stock (ELD.TO) that had broken its downward trend and reversed its direction. I bought 300 of these and rode this stock higher until it changed direction again and headed lower. I sold my 300 at a profit of $0.05 each, which actually lost me money once you factor in commission.

I then bought 300 FRPT @6.56 which also seemed to be breaking its downward trend and moving higher. Unfortunately this was a false start and I exited @6.52 for a loss of $12 US plus commissions.

Finally, I saw my old friend TSYS breaking its downward trend. I jumped on board at 7.44. I saw this stock rise as high as 7.52 before turning downward again. By this time I had admonished myself for becoming a day trader, recommitted myself to sticking to Swing Trading, re-established support for TSYS at 7.30 (the low of the inflection point on the 15 minute chart) and waited for the quiet close. This came at about 7.37. Somehow somebody snuck a 7.25 sale in there at the bell but I think that must have been an anomoly. I will see how TSYS reacts tomorrow. If it closes below 7.30 on the 15 minute chart, it is time to exit. Hopefully it can resume its pull back play and rise towards it's previous high of 8.78.

Some things I learned today:

- if the market is acting all negative and your stock is taking a beating pushing it below support, sell and wait out the craziness. Once the market has settled, look to re-enter a position in a stock meeting the criteria today for a pull back play strategy. It may even be your original stock but it does not have to be.
- your money doesn't need to be in a position. Let it sit if the market is doing crazy things.
- do not become a day trader just because. If you are going to trade a particular trading strategy, day, swing or position, follow the steps for developing a trading strategy and implement them in a structured and orderly way. Don't call an audible. The market isn't going anywhere and many other opportunities will come. Trading erratically is bad for business.

I am sure there are other lessons from today but they will need to be added in a future post. Today was a scorched earth day. I am lucky to really only be out my commissions on my later trades. Hopefully I do not get burned early tomorrow by that late trade on TSYS which pushed it below my support.

I will need to be back at my computer early tomorrow to see what happens.

In conclusion, I will further admonish myself for use of the word "hopefully" twice in my discussion of tomorrow's performance of TSYS. There is no room for hope in the market. Hope will make you broke. I think Tyler said that but I'm not sure. I am keeping it.

Cheers,
Mike The Skiing (and Slipping and Sliding) Trader