The Importance of Watching Your Indicators
Every trader that has been consistent and has
developed a set of rules knows how important it is to always respect
those rules. Too many times when the rules are broken, the outcome is usually
not good. However, there can be times when we simply react to a situation
without doing that final check to make sure the trade is still a go. Let me
share an innocent enough example from my trades yesterday.
I was watching Altria
(
MO |
Quote |
Chart |
News |
PowerRating) since it
was trading pretty well and is pretty thick. It was trading along with the
S&P’s pretty well also. The problem, if you recall, was that the S&P’s were
having a tough time breaking above the 60 period ema
I had decided to wait patiently for the market to indicate that it was about
to thrust through that level before I jumped on MO for what should be a decent
move to the upside. Needless to say, with one eye on the spooze and a wandering
eye on some FX charts, I was not watching MO. Suddenly the S&P’s made their
move, it was time to strike. My fingers sent the order to BUY 3000 MO at 56.87,
I was filled pretty quickly. The S&P’s made a nice push through the 1143 level,
all was going according to plan.
Once I got filled, I put back up MO on my
1 and 5-minute chart, I did not like what I saw.
Can you see where I made a costly error?
Yep, despite a decent a decent push in the S&P’s, my failure to check the MO
chart and see that it was overbought as defined by the stochastics suddenly put
me in a situation where the odds were clearly against me. Without a sizeable
move in the S&P’s, I was a dead duck, and that is ultimately what happened, I
sold out at 56.73 and 56.69. This is the type of trade that is rather tough to
recoup in a market like this. What can you do? Nothing, it was a mistake I
have made many times before, and sadly, will make again. However, if one
constantly reminds themselves, or better yet, does not get distracted, these
trades can be reduced…dramatically.
So, that being said, whatever your trade checklist is, make sure you adhere
to it.
FX
What can I say. Yesterday’s column was touting how the 50 emas on some of
the major pairs held like rocks and the Dollar Index was looking to head back
down. In fact, last night I got long the EUR,
GBP and CHF
based on this analysis alone (albeit using a 60-minute chart) and thought that
everything was in place for a decent trade. Fast forward into the early morning
session. All three trades were stopped out…thankfully.
The DXC proceeded to go on a bender to
upside and the EUR,
CHF and GBP
got hammered, retracing all of yesterday’s gains. What gives? I am not real
sure, all I know is that this volatility is a bit too much, I like volatility
that has some structure, this is rather erratic. It is tough to gain an edge.
I am going to let things settle in for a while and re-evaluate. A trade may
come later today or on Friday, it is just tough to tell right now.
As always, feel free to send me your comments and questions.
Dave Floyd