Sunday, August 23, 2015

Oil and trading rules

Since the last update oil went and shocked the world. I think the turn is close now. Unfortunately I got overcommited. the lesson for me is to just follow my trading rules. They are:

1. At least one of the following criterias must apply.

A, Chart is in a blow off top
B, Chart is in a test of resistance
C, A very strong fundamental case for entry exists

2. Manage bet size. A 3X leveraged chart must be able to withstand 700% from bottom to top.

3. When exiting shorts do not re-enter them when the chart goes back up. See point 1.

4. Tests of resistance should be bet very carefully from low positions.

5. Limit the total number of trades. Really good setups do not come that often.

Can you believe it. I did not follow my own rules. Initially I identified a test of resistance (trading criteria 1 A) but I went in way too heavy early on. I added to positions very soon after the initial position without my trading criterias met for those additional entries. I totally violated rule number 3. 

Even though i had rules I did all this. The problem is that trading takes place under long period of time. Dicipline gets lost during the way. I forgot why I had the rules and I even forgot I had them.

I am thankfull for this hard earned lesson.

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