I could write one of two blog posts today: a very, very long one on the things I did wrong or a much shorter one focusing on what I did right! In short, I had a horrible morning and was 80% of the way to my daily stopout. I realized that I had pretty much two choices: I could keep going and probably hit right through my stopout on the next trade (based on the way I was trading) or I could do something else. I opted try something else. I took a walk, had a nice long coffee break with my new mentees, and came back to the desk in a much better frame of mind.

Fortunately, the market presented me with the opportunity to undo the damage I had done in the morning. (We aren’t always so lucky.) I had assumed the earlier part of the day was a range day, but the market broke down and made a pullback into 2:30. I took the trade marked A) on the chart, but said to the new traders sitting near me that “this one probably won’t work because it will probably be a complex pullback.” What I meant was that I had to take that short entry because it was possible the market would have melted down from that point, as this was at least the third bear flag on the day, depending on how you were counting. The third (or fourth) pullback usually tends to be a complex pullback, meaning that it has an ABC shape itself. For traders trading these pullbacks, we usually have a small losing trade, but then are obligated to take the next one because that is the good one.

My first attempt to short (see the first red arrow) was a small loser, as expected, but then the market extended through the moving average. Some of the sectors that had been weak started to turn back down, and I saw a clear entry (the second arrow). This, and the later entry at the third arrow, got me back to break-even on the day and I ended the day up, rather than down. A lot of work to make enough money to buy a pizza, but it sure is better than the nice rip I was looking at mid-day. The real lesson here is not so much the market pattern, but that sometimes taking a break is the best thing you can do. That cup of coffee I bought actually turned out to be worth several hundred dollars.