Trade Recaps:


QLD - I entered a discretionary trade on 23Jul, buying QLD and setting a stop at -1 ATR (14d) or $3.00 from the executed price. The position size was set so that should the stop get triggered, the total loss would be 1% of total capital. At the end of the same day, I changed the stop to a trailing loss of 1 ATR. I was stopped out of the trade on 28Jul a $70.49.


Rationale for entry: The rationale for the trade was the bullish setup on the $NASI detailed in a post on 23Jul and mildly bullish COT data for the Nasdaq 100.


Reason for the loss: In retrospect I should have kept the stop loss at its initial setting until a positive trend was established. Changing the stop as I did caused me to be whipsawed out of the position.


Conclusion: When the 10 day low is equal to or greater than the executed price, the stop is changed to a trailing 10 day low.

DUG: Entered a discretionary trade on 23Jul executed price $35.94 with a stop set at -1 ATR (14d) $2.00 or $33.94. Position size set to lose 1% of total capital if stop was triggered. Doubled position size on 29Jul at $37.48. New stop set at $34.68 which was -1ATR from the average price of 36.68. Stopped out of position on 30Jul at 34.68.

Rationale for the entry: DUG had broken above $35 resistance on strong volume. Energy prices continued to break down and the trend appeared to be up.

Reason for loss: DUG dropped dramatically this morning taking out my stop and violating support @ $35. I suspect this is a short covering rally, but it remains to be seen.

Conclusion: Several things went wrong in my decision making process.
1. DUG is a volatile security. 1ATR may be insufficient setting for a stop loss. 1.5ATR or a 15 day low may be more suitable.
2. I had no good rationale for doubling my position other than the fact that the trade appeared to be working in my favor. I failed to use sufficient money management principles and ended up losing more than 1% of my trading capital on the trade. Actual loss was 3% of total.
3. The break above resistance on 23Jul was probably insufficient reason to enter the trade. Evaluation of COT data to support the trade should have been done.