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Shorting All Time High is OK (if you know that you are playing with fire)
I really wanted to be long Nikkei today. It's on a rip and at all time high. We closed up >1% yesterday and opening today by more than 1%, again.
However, I am short. Let me explain. I have shorted ATH, multiple times, in the past in a stupid way. But my new avatar is different. I'm stats based and I respect probabilities now. Though I do NOT have specific data for Nikkei, I am using SPY data with the enlightenment that humans are similar across the globe, especially when it's about money and it's associated emotions of fear and greed.
Markets closed up at ATH (5 years high which is pretty close to ATH) on close to 400 occasions in the last 2 decades. When we open up big the next day, the following is the outcome. It's slightly bearish, but only by a small margin. However, I also see a decent chance of -1.0% ish close and that's my theme today i.e gap closure.
However, I needed some supporting evidence before I place this counter-trend trade. Once I saw bigger size trades positioned at overnight high, followed by pullback @ RTH open, that gave me some confidence to place my short. Finally, I wouldn't want to give too much wiggle room with your stop for this kind of trade. Because, I'm dancing with the Devil.
Normally I would ramp up to 4 lot but my new rule is to try only 2 on counter-trend trades.
My entries were picture perfect but left some on the table when I exited. I'm not complaining on a narrow range day so far. My gap closure thesis may still work but I'm flat now and keenly observing.
I had just 1 lot today. I was trading like this for several years but feels strange now to not add to my winner. I wanted to scale up but the range was so narrow and choppy, with no real conviction from either buyers or sellers. Then I realized that it's because of the CPI data.
My decision to ride the CPI storm paid off, even though I almost gave up all my paper profit during the whiplash. I was able to grab a good chunk of the daily ATR.
Historically, today is mildly bearish but YM is holding up. However, shorts are relentless @ the ONH area and I have joined them. Though I grabbed small profits, I think I will keep 1 or 2 lot till the end of the day as the benefits or PB below 40k outweigh the risks of retest of 40200.
Though the stats were neutral today, I decided to short or fade the move. Not a bad thesis but I should have gotten out with new HOD above Y-H for a small loss. But I decided to leave it till the end of the day 'hoping' for a reversal day. I had 'deja vu' and realized promptly what was going on i.e shorting ATH, and got out quick. I didn't add to my loser which is another welcome change. I did consider long but due to some personal distractions at home, decided to call it a day early.
Another good week of trading. Happy weekend everyone.
Another good week. Currently I'm focusing less on P&L and more on consistency in execution.
Goals achieved so far are
1. Not adding to a loser &
2. Exiting losing position quickly and gracefully.
Adding to a winner is still erratic but that's not necessarily because of my lack of intention. It's rather due to the market condition. The main challenge is managing trend reversal when I'm fully loaded. To minimize harm, I decided to be only 1/2 my max size when I'm fading i.e couter-trend trades and full size i.e 4 contracts when I'm riding the trend. So far, I'm happy with the results.
Promising start for my full-time trading adventure.
Disclaimer - I have a steady job which pays me well. I also like my job, (for most of the time). I can take extended periods of leave without pay. I will continue to work for several more years and would never recommend ANYONE to do full-time trading until they are consistently profitable for 3+ years.
I have been trading 'here and there' for more than a decade now. I have a health background but I was fascinated by economics for a very long time. Since May 2024, I have been trading full-time, but during asian hours. Though I had few stretches of full time trading in the past, it was usually for just a few weeks, and often during my holidays in Asia. This time though, I promised myself 4-6 months and also committed myself 100%. Though I was cautiously optimistic when I started 2 months ago, the actual results are beyond my rosy expectations of 60% win-rate with profit factor of 2. However, I will not allow this to make me feel over-confident or complacent and I will continue to strive hard to develop good trading behaviors, especially adding to my winning trades. I am NOT a 'show off' kind of guy and in-fact didn't want to share my results at all. There are 2 reasons to do this.
1. Public accountability helps me to cement my positive habits and embarrassment is a powerful motivator for me to avoid stupid mistakes.
2. I'm hoping that other retail traders can see the 'long, torturous and painful' path one has to take to come to 'this level' which is still closer to mediocre than success.
After eventful weekend, it's fairly common to have a dull start and I have learnt to live with that. I had a short bias for DAX but I waited, waited and then waited a little more.
Finally, my sell signal fired off and then I shorted. Though I had to endure a small MAE and new higher high, it was expected on a choppy start and hence I wasn't shaken off. Eventually we sold off and I grabbed 65 points but still 'mildly' disappointed for 2 reasons.
1. I couldn't find a decent spot to add to my short. The rebound hit my limit sell price but I didn't get a fill. Urgh. I didn't want to chase which was a mistake as there is plenty of room to fall down, as per ATR.
2. I could have taken profit at key level and round number 18800 but instead I got out 14 pts higher. Optimising exits is going to my next focus.
I'm not complaining as I needed to be with my kids for a couple of hours to help them with their exam preparation. Markets can wait.
