A poorly timed entry was very costly today
The little things are very important
I’ve been working hard over the past few weeks to get better use of fibs and the $TICK while trading the /ES futures contract. Part of the system that I’ve been developing is an indicator that shows market strength and divergences as a part of my trade entry pattern.
Well, today was a perfect example of how the system works, and why I am a trading retard sometimes.
The setup
If you’ve ever been over to E-Mini Addict you’ve heard over and over about the ambush trade. Long and short of it, markets tend to retrace to the 50% level of a move before continuing in a trend. They generally do not move in a straight line.
I drew a quick fib from the highs of Thursday to the morning lows today and had a trade target entry of 820.5. This is based on a continuation of the move down and my continued belief that we are oversold and due for a retracement.
Based on the fibs that I had drawn, this trade should get to about 807, and I would have it setup to begin trailing at the 0% line – 811.
Trading while stupid
Maybe that is a bit harsh… maybe not. After dropping in my orders to get into the trade – entry 820.5, stop 823.5, trailing (+2.5) triggerd at 810, I went back to minding my own business, happily burried in some new projects at work. I took a quick glance at the trade screen and for some reason (impatiance coupled with stupidity) decided to get into the trade early. I did not let it setup fully.
A proper setup was to enter at the retracement price level, with confirmation of the continued strength divergence (the indicator on the bottom). I was keeping an eye on the internals indicator to ensure the market was still exhibiting waning strength. All of these things were happening, the downward channel was holding and the $TICK was confirming an upcoming drop.
Everything said that the trade was setting up perfectly. All I needed to do was nothing. Just get back to work. Don’t touch the keyboard, don’t adjust the order, don’t do anything.
Early entry = premature exit
After jumping the gun on the entry for this trade, I pulled down my stop to 817.75. I was happy that the market was moving down, and wanted to lock in my “free trade.” With the crazy manipulations that have been happening, I didn’t really want to be exposed all the way to 823.5 (the correct stop) so I figured it was appropriate to lock in a freebie.
My stop, and entry, were both in the middle of the markets wiggle zone, and of course got nailed. As soon as my horribly low stop got nailed, you can see on the chart that the /ES dropped like a rock, would have quickly triggered my trailing stop and locked in a nice profit.
Let the trade come to you
As you can see on the chart, the trade was a great setup. I spotted it quickly, had the orders in place and should have left it alone. Done properly, this would have captured a quick 10.5 points. Instead, I locked in a measly 1.75 points.
Just be patient. Don’t jump the gun on your trades. Let them come to you. I think I’ve mentioned giving away iPods before on goofy trades, well this one was 8.75 points – $437.5, or two iPods per contract. I really like my music, and I hate giving away iPods.
