1 Step Forward 2 Steps Back
We had high expectations for Friday’s trading session. A strong pullback towards the end of Thursday’s open market hours and a continuing pullback on the after market hours raised our expectations. We believed traders would rather cash out for the weekend than hold uncertain positions but as the trading session advanced, we were proved wrong.
We were holding two positions from previous trading this week, one AMD PUT and one SPY PUT.
The session began once again leaving a gap that it would quickly fill, it created a support and rose once more, as it was not able to return to the prices of the beginning of the session we thought the pullback would continue, we spotted the descending pattern and once it crossed the EMA’s it was confirmed so we took action. We bought 2 more contracts, May 29 2020 AMD 270 PUT at $8.75, bringing our average price down to $8.90 the trend continued until it found a support, we waited, we were hoping it would break this support and drive the price down to sell our contracts with greater gains, it was not like this it bounced back and started climbing once again, by the time we took the decision to sell the contracts they were trading at around $8, we managed to sell for $8.02 and were able to cut our losses. The trade we had been waiting all week played us wrong.
AMD had a really negative aftermarket and with other companies of the sector performing poorly on Thursday like Intel Corporation did, we had a good reason to believe that it would be affected as well and this would trigger a strong selloff before the weekend. It started trading really negative, but the trend was not able to continue, it started to bounce off in a support at around $54.50, after it settled this new bottom the price easily climbed, we sold as the indicators demonstrated a change in direction of the trend. Once again, we sold to cut losses and not to lock in profits.
We made several mistakes with these trades. We did not follow our plan or the day trading rules we had set and we had to pay the price.
The idea of these trading account is to day trade options, meaning that win or lose, we will exit all positions by the end of the day. We agreed to cutting losses to a certain amount and we did not do this, we were stubborn and we thought the market would take the direction we believed and off-course we were proven wrong.
Even though we lost this week there are important takeaways that we must not ignore. We are eager to reach our goal of $25k so we can place as many trades as we like but we need to be smart and we cannot allow this ambition to guide us into taking bad decisions, by taking risks like we did this week, we may achieve greater returns, but as it was demonstrated, we may also lose, and far more than what we set as a limit. The plan we had was made for a reason and we must follow it, if we do, then someday we will reach the goal let it be sooner or later but we will get there, if we don’t, chances are that we will never get to reach this because our wins will not be enough to cover our losses.
