Tuesday, November 06, 2007

Need to Focus on Trades with an Edge

This morning I fell victim to over-trading/over-confidence. I had been doing pretty well this month so far and then decided to make a trade in the Australian Share Price Index futures. Partly to get over my fear of the size of the contract (about twice the size of an E-Mini S&P contract, four times the size of an E-Mini NASDAQ contract). The results were two losing trades in a row more than wiping out my profit for the month so far. This is the equivalent of my GOOG and AMZN trades last month which turned what would be a winning month trading US index futures into a losing month. I need to focus on the trades where I have a documented statistical edge and not experiment with other sorts of trades where I am just guessing. I haven't succeeded yet in modelling the Australian index. It tends to follow the US market but not sufficiently so for the US models to be reliable indicators. And the contract size is much bigger than what I am trading in the US, so any mistakes can easily wipe out my US-based profits.

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