19/02/10

Wrongful trade exit yesterday - offensive stop loss order today.

Still, apart from the bad break, couple of mistakes were at the footing of todays snafu trade. Opened long on:
1) bullish internals (before entry $tick: 2t<-800 vs 13t>+800 w/ 3t>+1k; $add: +550, while SP500 plus only 0.25%); 2) $add soaring more aggressively than ES & already making higher high while ES only touches its interim high.

But soon ES slided sharply, shortly fell below VWAP and met my stop loss order. What was wrong?

1) I underestimated ES bearish divergence with leading oscillators. Even before entry I have knew that $tick had posted higher high. So divergence hadn't appeared on $tick chart unlike on ES chart. In the sessions when volume is heavy, such pattern is a sign of faulty ES divergence call. But looks like, the thiner volume is, the more likely $tick will mislead you, by posting the same higher highs and lower lows as S&P 500 do (check this tendency out in a middle of a low volume session). I had to count it in. Plus, near the level where ES divergence was, also took place strong resistance level - 1108.50p ES - at least 14/12/09, 02/12/09 & 16/11/09 VPOCs.

2) When i did entered long position i have realized that exact short-term call to buy, like sharp broad sectors push up, wasn't at a place. So i did accepted ES little bit sliding before rallying. Even more, I did allowed the possibility of ES drawdown to VWAP that indeed had occurred. That's where one of mistakes was. Remember one of traders mantra? A good trade is profitable right from the start.

All in all, the pattern and the trade that have took place today is absolutely and abnormally the same as it was on last wednesday. Again last session hour, bullish internals, $add higher high, i enter long and ES firstly sliding to VWAP but soon pulling back above my entry level. Déjà vu.

For the past shortened, in response to holiday, week the fund have slided some 2.5%. If that is correction or unlucky period (in response to last two session trades) then it's ok.