By The Disciplined Trader
Since opening my short position on the S&P 500 a few weeks ago at 1560, the drop I was anticipating has failed to materialise. I was so sure the decline was imminent hence I felt confident enough to raise my stop to give the trade room to breathe. However, this action defied one of my strict trading rules, that of - if a trade is not in profit after a week or two then it should be closed.
As the S&P moves back to my opening level of 1560 I have to adhere to this rule and close my position for break even. I follow a strict code of trading with disciplined rules and I follow those rules for good reason. I’ve learnt the hard way that when you stray from your path then your trading plan is probably not right. Raising stops, changing your system, increasing margin and other capricious actions should always be questioned when your trade is not going your way, it means emotional attachment is getting in the way of rational thinking and discipline. My trade should have shown a profit right from the start, that was my plan but that didn’t happen, so I have taken the steps to protect my capital and covered.
At this moment in time I couldn’t tell you why my trade didn’t work out or why the market remains strong, perhaps the bullish cycle has not quite exhausted yet, it certainly looks more likely that the S&P will reach new highs just like the Dow did a few weeks ago. Let’s not forget that there’s an army of bulls chasing this index higher! There’s a chance that it’s tracing out an ending diagonal, which is described in the FTSE 100 short term forecast (for members only), if this is the case then the rally will end near 1572.
In Europe however, the FTSE has more bearish chart action than the S&P, it’s well below its previous high and looks less likely to rally much further from here. Should sparks of bullish momentum push the FTSE higher, I’ll be watching 6500 for a potential selling opportunity.
The Disciplined Trader is an average guy who has little fundamental knowledge of the financial markets, yet he consistently makes money trading. He simply applies the basic rules of trading discussed in bettertrader.co.uk and executes his trading techniques applying great discipline.