Saturday, October 13, 2007

Made a Trade

And promptly lost. But everything wasn't bad about this trade. The model was short and I went short. I waited for the index to rise to what seemed like a high point first and I got out correctly too though there was a chance to get out with a $20 profit instead which I missed.

This was the first day that the model was indicating short following the sharp intraday reversal on Thursday (US time). But I felt that the market might instead rebound some. So I didn't go short early in the day and waited for an opportunity. This seemed to arrive following the US PPI release at 8:30AM New York time. Non-core inflation was unexpectedly high and bond futures dived as traders assumed the Fed would be more reluctant to cut interest rates (or even might raise them again). But core inflation came in close to expectations and a strong retail report was also released. Stocks reaction was to rise and this is where I went short on the assumption that the bond market was right. Also Oscar recommended shorting the ES (SP500 mini contract) around this price level (though I was trading NQ).

Initially the trade appeared to pay off, then things reversed, then just after the open the market pulled back again but I didn't get out and then it soared about 15 minutes in and I bailed. It kept rising from there, so I was right to get out.

I'll keep doing some research on new models and get ready for another trade...

P.S. The model was stopped out two days in a row. This did happen before in late July (that was when it was long and stopped out twice, this time it was long and then short and stopped out) and before that on 24-25th January. It didn't happen at all in 2006. The model is also down on the month to date and underperformed the market in September. Trading conditions are tough for my "style".

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