Trade The Journey

Trade The Journey

Greed or Jackpot mentality?

Trade Asset: SPY (S&P 500 ETF)

Strategy: Bearish Vertical put

Leg 1: Buy $427 put

Leg 2: Sell $419 put

Trade Expiration: 10/04/2023

Premium Paid: $2.50

Targets: Loss threshold: 10%/Profit Close: 60%

Profit/Loss: (0.16)

Hypothesis: The market is falling due to higher yields, weakening consumers, higher crude prices and higher volatility. I think it will continue.

Premise

After getting burned the previous week and watching the market continue to fall as rates rose, I thought a bearish position would do well. With volatility rising in the market, I had to be careful not to let losses mushroom into major drawdowns. Before the last two trades, I watched the capital in my trading accounts evaporate.

To be honest, I’m still learning the best time to take profits. Cutting losses has become a little easier but it’s still challenging, being that I’ve seen several trades return to profitability after initially starting off as a loser. Maybe I developed a little overconfidence in my trading ability.  I also need to return to planning my trades the night before instead of entering the market on a whim and prayer.

Trade Management

The last few trades I’ve placed were correct on the market forecast, however the trades weren’t managed very well and turned into losers. Even the trades where I suffered major drawdowns, began as profitable trades. In fact, my most recent trade drawdown of $300 began with a profit of $200. I watched as my profits steadily decreased, thinking it would come back but it never did.

This trade started off with a profit but was choppy from the start. Several times, I saw the profit reach a suitable level, but I failed to close the trade. My thought on the trade was that maybe the GDP might surprise the markets and that rates would continue to affect the indices to the downside. I felt angst as the market bounced back on Wednesday and when I checked the premarket on Thursday it looked like the market was poised to rise again.

While I knew that I had to close the trade when it reached my loss threshold, I still hesitated to close the trade. I kept thinking and thinking about would happen instead of just closing the trade without thinking according to the rules placed. Luckily, I closed the trade when I needed to and I hope I continue to limit my losses.

Develop better or more specific reference levels to gauge the trades probability for loss or profit. This will assist me in overcoming the lack of clarity on when to take profits verus letting my profits run.

Trade Review:

I’m happy I didn’t suffer a serious drawdown but upset that I keep letting profits slip through my hands. I think that I need to develop a better understanding of when sentiment lends to the trend continuing versus when the market is uncertain about the direction. With time and experience, I’m sure I’ll develop these skills. In the mean time, I need to limit my losses while I continue to learn.

Trade Journal:

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