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Tuesday, May 24, 2011

Airelon's Challenge Chronicles 20.2: Bad Trading ... Profitable Trading

What is "Airelon's Challenge Chronicles"? You can find a description by clicking here.

So if you were watching either the Facebook page yesterday, or the Twitter Account, you'll see that I took action on a couple of trades that I mentioned in Sundays A.C.C. podcast. Namely, I went short Corn for a brief scalp, and I went short Soybean Meal for another scalp.

I walked out of both trades with a profit on very brief scalps. Tacked on another 3% or so to the yield return on the A.C.C. trading account.

But quite frankly ... it was a horrible day of trading, and there's no way I'm going to fool myself into thinking otherwise.

Allow me to explain.

One thing I did not consider before taking the short Corn trade ... was something that I often tell other traders to be aware of. So I ended up making a mistake. One that could have cost me dearly. Perhaps as much as 4% of my trading account. Yes ... I make mistakes. All the time.

What I should have considered was the average range of the candles, or volatility as it relates to the $ per tick. Corn moves with $12.50 per tick. The average range of one candle on the 10 minute chart at the time was about 20 ticks for a 10 minute chart.

20 ticks.

$12.50 per tick.

$250.00 for one bar.

Now look over the risk tolerance numbers that I posted on Sunday night. My maximum 3% drawdown risk tolerance stood at $92.08. So I was looking at a scenario where 10 minutes could have wiped out 2.7 times my maximum drawdown risk tolerance in just 10 minutes. Naturally, I had some rather substantial 'intra-trade drawdown' as well, even though you can see I exited that trade with a profit. I am going to list the updated money management numbers after the two trades today, and you'll note that my drawdown numbers have increased dramatically.

It's taking a while to get used to trading such a small account.

So ... at this point? I'm thinking of just cooling it on the trading route for A.C.C. for the next week. Yes ... I added 3% to the account in one day on some really sloppy scalp trading, but I think I will wait until we can add a bit more 'starter fluid' in terms of an application of rule number two.

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Note: The above statements should not be construed as an investment or trading recommendation. Airelon's Investing and Trading Journal is a blog that allows subscribers to look 'over my shoulder' as it were, for my own personal specific trading and investing ideas and thoughts for the next week. But they are only thoughts as of the moment of publication, and are subject to change.. Any trades or investments that I discuss within this blog are simply my own thoughts regarding my own investing and trading outlook. Remember that entering any market is an individual decision. There is no guarantee that I will enter, or have entered any of the trading or investing ideas that I discuss in this blog; as larger accounts may require a different strategy as the ones presented here. This blog simply contains my trading and investing thoughts for the next week. I, the author do not grant this work for wide distribution beyond any single individual subscriber as this publication is protected by U.S. And International Copyright laws. All rights reserved. No license is granted to the user except for the user's personal use. No part of this publication or its contents may be copied, downloaded, stored in a retrieval system, further transmitted or otherwise reproduced, stored, disseminated, transferred, or used, in any form or by any means except as permitted under the original subscription agreement or with prior written permission. I personally only enter any market after watching and reading the tape and I trade using money management principles. The losses in trading can be very real, and depending on the investment vehicle and market, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. I do have 15 years of experience in trading and investing in these markets. Airelon's Challenge Chronicles are demo accounts,with all of the inherent problems therein, which are used within this blog in an attempt to track the results of my own thought processes., and is run as a model. Traders who should make their own decisions based off their own research, due diligence, and tolerance for risk. Any pictures used within this blog are believed to be public domain. Any charts that displayed using the ThinkorSwim platform, or any other charting software are believed to be public domain. Any other pictures were obtained through Wikipedia's public domain policy. As a reminder, any trades discussed for "Airelon's Challenge Chronicles" would only be 'day trades' according to the parameters discussed for Airelon's Challenge Chronicles, at this stage of the game in order to escape the risk of over-leveraged gap opens in the commodity futures markets. As a 'trading sister' would have grown to the $30,000 level, I would have graduated the account into 'swing trading'. In addition, it is understood that readers have read my YouTube methodology series. It is also understood that the writer of this blog has repeatedly warned against the dangers of shadowing any other traders thoughts. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk

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