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

Friday, June 01, 2012

Tune Out the Noises

Once in a blue moon, my plan worked out.  The May bottom got retested on a big red gap.  The late May rally was a bear flag after all.   As my first target has been met, I've taken the profit off the table (SPXU, VXX, TZA).  I'm not going to get greedy, especially with the weekend ahead where Europe may come up with a quick plan to kick the can down the road for a few more months.  You may disagree, but that was my plan.

I would have been a bit more aggressive following my plan if it weren't for TraderFlorida getting bullish in the past few sessions.  He even kept 1/2 of his AAPL position overnight, and actually he said he was going to add more yesterday if AAPL held on to the HOD.   My bearishness was undoubtedly dampened by the red hot TraderFlorida's short term bullishness.  Let's not kid ourselves, if TraderFlorida is long AAPL, who in his right mind would dare to short AAPL?!   So I concocted a pair trade, shorting SPY and long AAPL, overnight. I made out break-even this morning but was more than a bit rattled because the pair trade assumed upside move where AAPL would outperform SPY.  On a downside move, AAPL would move faster than SPY as well.

And how about Mr. Fly, the other twitter personality I respect and  follow?  He was up as much as 20% YTD but as of today he's (-3%).   That's a 23% swing!!!  See his blog today: A Story of Decay and Destruction.   If this kind of roller coaster happens to a professional fund manager, what do you expect as a small time trader/investor?   As he was down so much in the past few session and was still adding more chips to the fire, I couldn't help but adding a few of his longs in sympathy and also just as hedges to my short ETF's, out of respect (and fear of him).  For example, ZNGA, YELP, and TEX.   Well, needless to say, these hedges were just like insurance premiums, spent in vain as the "just in case" scenario did not pan out.


Tune out the noises - not just CNBC but other tweeters and bloggers as well -- IF you have a trading plan which you should, otherwise, you shouldn't be trading.  Not tuning out the noises would confuse you and lessen the conviction for your own trading plan.  Even if he is a respected trader and has a red hot track record, you never see his trading plan as a whole, how much confidence (and thus what position size), how much hedges he has behind the curtain, etc.   Does it sound familiar when a stock tanked and you were pretty much sure that John Doe was screwed, only to find out later that he held some options to hedge his bet and revealed that he made out OK?  Should you risk your hard earned money on only half of a story?

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