How much MAE is acceptable?

I had a good start with YM today. Bearish bias executed well for a quick 75 points profit. My intent was to hold it longer, ideally for few hours and also scale in, but the selling pressure subsided quickly. Hence I became cautious and banked profits. I hate to trade just 1 lot these days but that was the best option today.

Then I shorted the next bounce in 500 area. Though I expected some rotation/rebound to shake off weak shorts, YM made a new HOD. Since it had the 'stop hunt signature', I took the risk of 'let's see what happens next'. Luckily I was right and we are heading down again but I had to sit through 150 pts MAE and it got me thinking about my trade execution options.

I could have, perhaps should have, gotten out for 50 pts loss and re-establish my short again above Y-H. This is the most sensible action and I will consider this in the future. My rationale for holding on to my short was that 'gap closure & more' thesis was still more likely with 200+ pts gain possibility. Hence giving my trade few more hours time seemed reasonable, especially with the profit cushion from my previous trade. However, I have to revisit my strategy of unmonitored position beyond EU close.
y

A good loser

I'm not a favorite of hard stops, especially the ones within daily harmonic rotations. However, stops at safe locations are necessary for extreme scenarios. My goal is to get out of my loser at a 'good' price. Today I had a good example in Nikkei225 Mini.

I bought the pullback in a bullish trend and it's a high probability setup for a rebound from the support. i.e Opening range and EMA cloud. However, sellers had other plans. When price closed BELOW the cloud, that's the confirmation that the uptrend is broken. Now my bullish thesis is invalid and I have to get out. Instead of taking my loss in a hurry, I waited as I was expecting a rebound to the previous support (which has become resistance now). I got out for a 'smaller' loss and quite happy with that.


1

DAX is dull today.

I'm long DAX which is a counter-trend trade but as I'm typing, it's range bound. Hence, break-out is good possibility and I'm betting that it's going to be to the upside. Since we gapped down, my thesis is gap closure which is a high probability set up in a bullish market. Volume is unusually low and I'm not sure what that's about. Hence I prefer non-time based charts to see the price action clearly.

My initial entry was at a perfect spot i.e retrace and retest. I also scaled in once, which is far from an ideal location. I was tempted to take profits but decided to try and build my positions. I will add one more if we make new HOD but my confidence in this trade is not high. That's usually a good sign




d

My DAX trade was a small but reasonable win. Today was very choppy with narrow range and hence I decided to carry through US session. The price I paid was 'missed opportunity' of a massive move with DOW as couldn't focus well on both.

Moving forward, I will likely trade Nikkei in AM and Dow in PM only. I like trading DAX but it takes a big chunk of my social time currently and hence putting it on hold for now.

My posting here will be limited and sporadic for the next 4 to 6 weeks I.e Summer holidays. Good luck everyone.

Near miss in Nikkei

My long trade in Nikkei seemed to work initially. Hence, I scaled in but then it stalled.

I had a small stop-loss which was hit but I realized it's only for my 1/2 size. Instead of getting out quickly, I re-analysed the situation. Unfortunately 'hope' took over and I decided to hold it till the end of RTH. Once the thought of keeping it overnight kicked in, I realized that my old habit of 'turning a day-trading loser to a swing trading loser' was coming back. Quickly I went flat. I'm glad I did
y

Nikkei Short - worked

nk


Dax short - not yet

Dx

I had a perfect short entry and scaled in at a great location, only to realize that it was in sim. My Sierra didn't connect with my IBKR for some reason.

Normally I would be pissed off and then usually revenge trade, often in the opposite direction. Not today. Stuck to my short bias and then got in at a worse location but still good enough to make money. I even had the chance to scale in.

My exits were at the best possible locations. However, I didn't follow my current rule of 'full exit' only after the end of the trend. Hence I added another short and will take my small loss from the position but overall happy with the execution, especially after the frustrating start.

1

Low risk Nikkei trade

I missed the 1st leg down as woke up late today. Instead of cursing myself, I waited for a good opportunity to short again. I had the perfect low risk entry point and also a chance to scale-in.

My exits were at support level and also very conservative. Though I could have been greedy with my profits, I'm still getting used to Nikkei's odd, but good, practice of lunch break for 1 hours. Futures volume dries up during this time period. My bias is still bearish and will likely short any bounce if we make new low of the day.

DAX long worked too. However, I minimized my risk by scaling out 1 position break-oven during the opening range chop.

Though I wanted to add after we broke out of the range, it's easier said than done. Since I had only 1 position, I couldn't stay till the end of the trend and had to be content with 70 pts. My preferred daily goal is 70% ATR which is around 120 to 140 pts in DAX.

2

Tough day to trade

It's chop fest with YM right now. I started the day with a long bias and bought the pullback. However, I gave too much room and took a slightly bigger loss than warranted.

Then I was seduced by the 20 DMA below and expected a test. i.e. continuation of down move. So decided to take a breakout short and also too quick to add (a big red flag). Breakout entries generally don't work for me. I thought today would be an exception. It's not to be.

Once again, I gave too much room for short and took a loss for my 1/2 size. Since the price action appeared like liquidity hunting, I decided to leave the rest on and subsequently covered @ Low of the day i.e VAL. It reduced the loss but overall ugly looking trade. (My earlier good execution with Nikkei and DAX compensated for this loss).

The key lesson is to have a smaller stop loss for counter-trend trades (and also for the scale-in entries).

y