Yesterday was touch and go as until the last hour the stock was poised to close within the channel. However, even had it not closed in the channel I had already found myself starting to look for ways to stay in the trade past my trading rule threshold of no more than a 1% of trading capital loss, rather than just admit my planned exit strategy was at hand and exit the trade. Below are just some of the ludicrous ways which I tried to justify my actions. Trading rules are new to me, I never had them in the past and probably because I don't generally like rules. But since this is my capital at hand I understand their importance and happy that I did exit the trade within my rules. Had I not done so I would just be setting bad precedent for the future.
- Redrew lines to be more liberal to give myself some wiggle room
- Justified that only the intra-day move was outside the channel but the closing was not. The problem with this is my channel was drawn with intra-day lines, thus I was trying to redraw lines.
- Yes it's broken the channel, but let's see if the 50DMA will hold as support!! (where did this come from? I made this up on the fly)
- Well I've got a SPY put hedge on that will make up for most of these losses
- We're bound to get a short cover bounce and I can close out then at a lower cost
- Yes my trading rule says to exit, but I'm not quite at the 1% maximum allowed loss so doesn't this allow me to stay a few more days and hope for a miracle?
It will be disheartening to see this close above my naked strike and thus lose -1620 instead of make +840. But it will also be disheartening if I didn't get out and ended up taking a the max loss of -5160. What is not disheartening is that I had an initial trade I thought was good, had an exit point for if I was wrong, and was able to follow through with the rule after some initial struggle. I am now about 99% psychological removed from the trade and it feels good. A realized loss is actually easier to deal with than an ongoing paper loss.
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