A Deep Breath Before The Plunge

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I’m ready. That’s the best way to put it. I feel ready. For the past two months, my instincts have been fairly good, but I was too uneasy, too hesitant, too scared to really take a dive and follow through on them. If I had followed my inclinations, I would be doing very well. The fear was too much though and as a consequence I have remained on the sidelines for too long. I don’t feel like doing that anymore. I have reached an inner calm and I believe that this week will finally see me take a plunge once more into the big pool.

I’ve looked at some of the markets, but oil is what I’m thinking of most. There is no certainty that I will enter into a position. If it doesn’t look conducive, I suspect I will just let it pass, but I will for the first time in almost two months be keeping a sharp eye out. That is the simple plan for this week. Keep an eye open, wait and if I see an opportunity, I’ll take it. The hunter is back and he’s found his appetite.

Time-Out

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Today was a needed break. Not from the markets as a whole, but really from having an open position. For the first time since I started this whole adventure back in June, this was the first time that I didn’t have an open position and also most importantly in soybeans! I needed that. It was time I took a step back to assess my progress so far and also to reacquaint myself with the myriad of other commodities out there other than, that most versatile of grains, the soybean.

Soybeans, if you are interested, actually closed up 7.25 cents. A lot of the news stories I’ve been reading have been talking about how the commodities markets shrugged off the continued recovery of the dollar today. I’ll admit that I was a little surprised to find that after yesterday’s drop, but should I really? It seems typical of the panic and fear that frequently visits itself upon the exchanges. There one day and gone the next.

I have no regrets however, I stuck to my trading plan such as it is. I had placed a reasonable stop loss based on the Average True Range and a weekly low. In fact, I didn’t actually realise how close the price was to my stop loss until I checked my account and found that it had been hit. Previously, I probably would have moved my stop loss lower as the price moved lower and this time that would be working out fine for me at the moment but in the long run, such an action is simply inviting ruin.

I’ve been trying to bring in cognitive biases into my posts as they are an idea that I find very useful for looking at my own behaviour. Curtis Faith provides an excellent explanation of some cognitive biases that can impact on trading in his book, “Way of the Turtle.” I am sure that I will be discussing this book at some later stage. For now, I just want to talk about the outcome bias. This is a tendency to judge how good a decision was, based on its result rather than the factors that went into why the decision was made. In the past I know that I would have been really annoyed with getting stopped out and I would have been frantic to get back in. Today, I had no such feelings. I think that is progress.

Instead, I read up on other commodities such as gold, silver, copper, coffee, sugar and oil. This is part of my fascination with the markets, all these every day items that are traded across the world and each day there is a power struggle to either push the price up or down. It was good to be able to broaden my horizons again. I also read some interesting articles on trading specifically on trading discipline and expectancy. Both seemed to be timely reads for me.

I’m not sure if I’ll open any positions before my WRAP UP this weekend, it seems unlikely that I will as I haven’t found the time to do any serious analysis of any trends in the markets. Instead, I think I’ll just enjoy this unexpected time-out.

Open Positions

None

Account Details

Account Balance: €585.48
Open Position P/L: €0.00
Account Position: €585.00
Overall P/L: -€1464.52
   

Stopped out of Soybeans

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I was expecting Soybeans to close lower today, but nowhere near limit down. The market touched limit down during the session and just before that I was stopped out. The overbought nature of the market and the pressure of harvesting were finally able to push the price down with the strengthening of the dollar as the catalyst. Wheat and corn closed limit down for the day and it will be interesting to see how much further wheat will fall.

Having no positions now open, I have a decision to make, whether to take my money and set it aside to build up a reasonable stake once more or to open another position in something. Initially I was leaning towards putting the money aside for the time being. However right now as I see that this correction was across the board, including not just grains, but metals, energies and softs, I think I might instead see if there is something that is worth getting involved in.

So much for my worries at the weekend of feeling comfortable with my position in soybeans. If I don’t quite feel the hunger, I’m not feeling the fear. Of course, I have yet to pull the trigger. I won’t be getting involved tomorrow, it’ll be the following day at the earliest before I open a new position. In the mean time, I will be looking at everything to see what the possibilities are at the moment.

Open Positions

None

Account Details

Account Balance: €585.48
Open Position P/L: €0.00
Account Position: €585.00
Overall P/L: -€1464.52
   

Too Much Fear, Not Enough Hunger

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Today is the end of September, and last Friday saw a lot of funds moving money around at the end of the month. I’ll assume that there will be some carry over of that change around tomorrow. For me though, things haven’t changed all that much from last week. Soybeans finished the week +12 cents and there is no signal to get out yet. I’m not even going to change my stop loss this week, as I’m happy with where it is at the moment. The coming week may have choppy waters as the news at the tail end of last week percolates through the market and it decides what it’s going to do.

Wheat is tantalising. I don’t know how much higher it’s going to go but the knowledge that due to my own mistakes I have lost out on the biggest move of the year is frustrating and infuriating. In short, I’m afraid of it clouding my judgement. Then there’s the fear, that just as I get in, it’ll reach its top and then start the slide down. In truth, it’s more likely that it’ll go up and then move sideways for a while before falling back down again.

As I look around the various commodities that I have been interested in and keeping an eye on for the last few months, I see that a few trends appear to have started, but again I’m feeling the fear. If you’ll forgive a metaphor. I feel like a hunter who’s been knocked up badly not so long ago, let’s say an elephant. I barely escaped with my life but now I’m back out on the plains and I’ve got a few animals within range. As I line up the sights, my eyes lose focus and I can’t pull the trigger. I can feel that some of these trends could be big movers in the months ahead, but I just can’t seem to get over the experience of being almost wiped out.

This fear is affecting my hunger for the markets as well. I’m comfortable with soybeans at the moment, that’s all that my trading diet consists of right now. I’m too afraid to branch out into other markets, due to this fear of my account getting wiped out and the idea that I’m too late to get in on these trends. I need to get out of this state of comfort and back into a mindset where I have the hunger and I can lose the fear. So that’s my little assignment for the week, to get back into the game and stop sitting on the sidelines.

Feeling Cautious

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I didn’t do much in the way of analysis this weekend, due to family engagements and just generally taking a break from everything. However, hanging over any thoughts I had, about entering into a new position, was the fact that I still don’t think I have recovered enough to open a new position. I have learned all too well that you need to be able to withstand short-term reversals and I don’t want to lose any more of my capital by needlessly entering a position and then getting stopped out a day or two later. The size of my account and the levels of leverage at which I would be trading a lot of assets also precludes me from a number of possibilities.

Nagging away at the back of my mind also is a fear of losing money, of a position going against me. Having previously been reckless I now think I’m feeling overcautious. I will have to work through this psychological barrier so that when I do have enough money in my account, I will be able to pull the trigger and enter into another market.

Only this morning did I finally look at a few different commodities. There were a few possibilities and I almost entered long into gold, but held off for the reasons previously stated. As far as this week goes, soybeans are obviously still worth staying in, so there was no need to make much of a decision on that. I did move my stop loss up some more, to protect myself from a price shock. All in all, nothing major.