Why added a bit more SCO position today – #oil short play
Today added more SCO & had some questions on twitter , chatroom & private feed as to my reasoning.
Here’s a chart below around 10amEST today on SCO – I had added just before 12noon when we were at $33.45 & $33.48
My initial plan this week was to stop out of $SCO if #oil pushed thru $104./$105 since next level up was $110 ( so already had plan)
Before i added i said in the chat room ( & i was serious) was that if not for the much bigger January /Feb profitable months, that I would have stopped out of $SCO already ( at the very least stop out of 1/2 ) . So having a monster $105K + January and $70K+ Feb to date played a factor in taking a loss of $4-$5k but it shouldn’t have and regret it a bit tonight as i’m writing this blog . At close on SCO I was down approx. $6,800. I told members I’d be willing to risk max $10k on this trade, since didn’t want to offset my Jan/Feb run by too much. In the scheme of things $5k is not much of a loss compared to my account size since won’t knock me out of the game but I still enjoy to review trades and what I learn from them ( whether they are winners or losers ). Most people don’t review losing trades but instead try to forget them. I’d suggest review those more, print them out & question yourself as to what you could have done differently. This will a life long commitment for some of you so take it very seriously.
The other factor that contributed to me not taking the loss Tues/Wed was that i’ve had such a huge win/success rate on $UCO $SCO trades and I know sometimes temporarily ( especially in #oil ) that you get much bigger moves/extensions at key levels since there are so many other factors ( like #IRAN #OPEC #economy etc. ) and its not always supply/demand related as some think.
We have one trader in our group that i really respect as an oil trader in our chatroom & whenever I’m not sure on a key level we have a quick conversation. I did that this a/m with him as well and we both felt the same about that an oil extension to $109-$110 was a possibility ( that was before the huge afternoon breakout ) but a drop towards $100 was also more likely to happen since most of this #iran News was priced in already.
When I did my Trade Recap for 2011 , I had a few goals for 2012 to improve my trading . One of the most important was to to stick to my initial stops since my strength is chart reading key support/resistance points, which I’ve stopped out on a few new positions already into 2012. Most recently last week on $IRBT took the small loss but came back up the next day
Unfortunately I should have stuck with my game plan & initial stop on SCO this week , but you can see from the charts I posted below , why I was having such a difficult decision once we bottomed out.
Had i been daytrading SCO the easy stop today was under $33 – I could have even scaled out of 1/2 once $33 broke down ( which was also our 3 day support before the afternoon breakdown)
Double click chart to make it larger:
Wednesday chart on #oil i posted to premium members & why i was having a tough decision with the stop
The chart below if of #CRUDE but you could have used the Oil Futures ( #CL_F ) & come up with similar key levels.
again double click chart to see it much bigger :
Here’s a final batch of charts of how I came up with that $104/$105 as my stop point since that $103.50 was our resistance so I used $104/$105 as max initial push.
The charts below are from Feb 13th 2012 – again ones that I posted on private feed for premium members:
I said that the one thing i was worried about on a further push over that $103+ on Oil was #IRAN problems – (which turned out to be the case this past long weekend)
What are the lessons from all these charts.
1) my first stop would have been my best stop into Tues/Wed this week
2) Even with the best plans & charts , be prepared to takes losses & if you change from initial plan ( have a secondary plan )
3) Plan ahead as i’ve done – someone else would probably not even understand this fast move today on #oil hitting so close to $109 ( i already figured that’s next resistance towards $110)
4) Money Management /Risk Reward /Position Sizing are crucial to survival ( i can afford the loss even if #oil spiked quickly over $110 ) $120+ i would not be very happy but most traders don’t know even have a game plan when they enter or exit a trade.
5) I hope you learned something from this extensive charting & analysis but wanted to share with you how i constantly review my positions ( especially ones that I play more often like OIL via UCO & SCO