... and the rules break me. My feel for the market wasn't bad this morning, but it went from OK to to crap in short time. Got up before the bell (3:30 am Hawaii time) and got shares of VXX at 32.01. Pricey but futures were a mess, Dow futures were -132 pts. Scaled in. Bell rings and VXX takes off like a bullet. I grab the rest of my position at 32.38, ready to pull the sell trigger if the market reverses. I'm in pretty good shape as VXX rolls higher, past 33.00. That's when things went bad. I got greedy and got more shares at 33.22, averaging out my position at 32.73. VXX sold off and I bailed out at 32.50.
VXX bounced at that point and went through the stratosphere, almost non-stop until it finally kissed 35.00. The math that boings around in my brain when I miss a gain like that is usually oversized, but I kept it at a minimum, looking for a re-entry price. I got back in at 33.97 while the 1-minute and 3-minute stochastics looked right, and VXX rose to 34.44. Then it sank like an anchor. I broke my (soft) stop-loss rule and held on as it fluttered to 33.00. I got out at 32.98, lost almost a buck/share, and it bounced back to 33.45 or so. So I missed bounces.
Trying to weigh volatility when the market is down 150 points isn't too hard. But once it hits -300 on the Dow and stays range-bound, it's a crapshoot. That's not what I want. There was no advantage at that point and I went from a small loss on one trade to a stupid loss on a second trade that was twice the loss of the first, even with half the number of shares.
It's the kind of performance that might put me on probation, self-imposed. I have to correct these nasty flaws, and to do that, I have to examine.
1. The buys at 32.01 and 32.28 were fairly good considering market sentiment. There was an edge there.
2. When VXX got over 33, my first thought was to sell, not buy more. A sell would've been a solid profit. It hit 33.31 15 minutes after the bell and stayed above 33 for 4 minutes. (That fourth minute had a range of 32.76-33.01. Crazy.) So I was up 58¢ at the high (at the time).
3. The pullback to 32.50 was another buying opportunity, but I was more concerned about the position I had -- which was larger than I expected, and thus, beyond my risk tolerance. (So I learned something about myself this morning.) That's why I got out instead waiting. Some people don't even bother getting out of something like VXX with its insanely wild moves. They're doing far better than I am, holding it from 25 or 27 or even 20 (three weeks ago).
4. The run to 35 was out of the blue as the market endured a second major selloff. I didn't chase, which is good. Traders who bought above 34 didn't get much chance to sell there. From 10:27 am (Eastern), it went from 35 to sub-34 in 9 minutes.
5. The buy at 33.97 was fairly good technically, but I should've stuck with a trailing stop-loss. I thought about a soft trailing SL on the first trade, but quickly forgot about it. Both times, it would've saved my profits. There was no reason to hold after VXX went back up to 34.44; I was up 47¢. Within 6 minutes, it was below 34.
A quick sell trigger on both trades would've kept my profits even though I missed the big run from 32.50 to 35.
This morning's loss cost me 1.3% of my trading balance. I can live with that. I can't live with stupidass trading habits. In summary, bad news is I need work on exit strategy before I enter a position for a near-term trade. I'm not consistent and good. I'm a little too patient in that situation.
Buying is easy. Selling can be tricky especially with a leveraged animal like VXX. Even without very good entry points, my max profit today would've been only slightly more than 1:1 vs. what I actually lost. Risk management is an F today. F minus.
Good news is I would've lost a lot more today if I'd been long the market at all. Being all cash is the only place to be right now. Unless you're brilliant and have held VXX and FAZ the past few weeks. Then I tip my hat to you and you and you...
