Warning: Following my trades may be hazardous to your financial health. See Disclaimer.

Wednesday, May 30, 2012

Sticking to My Plan

Per my May 22 post, I am layering in my short positions in 3 stages, with the premise that the market is due for a bear market bounce.  The premise can be wrong, but based on the longer term chart, it is better odds than 50 percent.  Now given the premise, I don't know how high the market would bounce, especially on lighter volume.  That's why I layer in at each pivot point, up to where I will have a full position, just in case the market goes down without looking back.  As of yesterday, 2 of my 3 planned entries to the short side have been executed (see pink arrows), via SPXU, VXX, TZA.

There is a fine line between what I am doing and "averaging down" which is a taboo in trading.  Here I have a plan, and each entry is a partial position (progressively larger in size).  I may be guilty in the sense that I am unsure of where to enter a full position if I were to make just one entry.  I can also be accused of "front running", but that can also be diffused by the fact that I'm entering partial position each time.   I am the first to admit that I am a terrible chaser.  I can't wait until the market snaps back down to enter my shorts.  I am also terrible in applying "pyramiding" as preached by Jesse Livermore.  It's complicated and there are endless trading styles. That's why trading is also an art.


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