COMING CLEAN: I MADE A BOO-BOO TODAY
It has been a long time since I made a trading boo-boo. A boo-boo - for clarification - is not when you lose money on a trade like I did with NFLX on Tuesday morning. That's just trading. A trading boo-boo is when you veer off of the road map for a particular trade.
Case in point: VHC
The trade started out wonderfully. My read on the trading pattern was spot on and my entry was a good one. The weakness was obvious from the moment I put on the trade. I didn't have an ounce of pain on this trade. Not one moment of doubt. It went my way from the very beginning and didn't stop into the close of Tuesday's trading session. In my mind, I said that once it broke 23 I would get out in anticipation of a bounce off the trend line at the bottom of its range.
VHC
This morning VHC broke through 23. I didn't cover. All of traders who inhabit VHC (there are a lot of them) decided that they would begin buying/covering shorts right on the uptrend line that marks support. I still don't know why I didn't cover. I just didn't. Call it my blond moment of 2011. Even though my head is shaved and I'm a male. Today I was a blond.
As the stock began rising and I was sitting there playing with my make believe blond hair, I started accessing my EDS. If you haven't read about my theory on EDS and how it influences trader/investor behavior, the link is here.
I have learned over a 17 year career that started at the age of 19 trading for myself, clients and on a trading desk at a major bank that once the door to my EDS is opened I HAVE to exit the trade. I become indecisive and must move on to the next one. Start fresh.
I know I have made progress since this is the first time it has happened in 2011. If you are new to the markets, it happens weekly, if not daily. Those with a few years experience should be able to keep it down to a few times a month at the most. If you have been doing this longer than 10 years and you haven't mastered your inner-trader to the point where you keep it down to once every few months, then you need to find a method that keeps the door to EDS closed.
