Be Careful When Your Routine Changes

Jul 1st, 2010 | By | Category: General Comments, Steven Spencer (Steve's) Blogs, Trader Development, Trading Psychology
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I have a fairly set schedule each trading day.  But on Thursday morning  my routine changes as I have a pre-work obligation that changes my schedule.  I generally arrive at the office one hour later than usual and do not run the AM Meeting.  This change in routine has had some fairly negative consequences on my trading PnL.  90% of the money I have lost in the past four week’s has occurred on Thursdays.

I became aware of this pattern last week and was determined to have a positive Thursday today.  I failed.  Reviewing my day has led me to the conclusion that I made two key errors that prevented me from making money.  The first was making too many trades outside of my primary trading stock.  The second was not getting back into my primary trading stock when I had an excellent opportunity.

My primary trading stock was DNDN.  It gapped down in yesterday’s aftermarket on some FDA news.   On the long term chart DNDN was already in a strong downtrend prior to the gap down.  DNDN is a heavily shorted stock.  I viewed the gap down as a chance for many shorts to cover as DNDN had come in about 50% from this year’s high.

When DNDN opened for trading today it had a powerful opening drive up to 29.50.  This drive took it about one point above its premarket high.  Then DNDN very quickly dropped one point to 28.50.  Pretty wild price action.  But it was still above its premarket high so I was not ready to give up on a possible bounce.  A buy program was turned on and it easily got back to 29.50.

As the market began to tank DNDN pulled back to 28.80 but held higher than its initial pullback.  It then traded above its opening high.  I was fairly confident that it would continue to trend higher to the 30.50 area based on my review of the long term chart.  But as stocks are want to do it first had a massive shakeout.

After trading above 29.50 in the next 15 minutes it traded all the way back down to 28.50.  Not exactly what I had been expecting.  I did a good job of managing my risk by lightening up on the way down and not buying any shares back before it reached 28.60.  But eventually it traded below 28.50 and I got stopped out of my position.

I wasn’t down much money in it but had taken some losses in poor trades in two other stocks.  I noticed that DNDN had only dropped 15 cents below the 28.50 level and within minutes had quickly popped back above that level.  So I bid for some stock at 28.52.  Unfortunately my bid only got hit for 100 shares.  It was almost 11:00AM and the market was extremely weak so I passed on trying to buy more shares at slightly higher prices.

Fast forward a few hours later and DNDN slowly but surely clawed its way back to the 30.50 area.  Lesson learned.  Never trade on Thursdays :)

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  • Markus

    Interesting post. The reason for your underperforming on Thursdays might be your split focus in the morning. The market always mirrors yourself.

    Cheers,
    Markus

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