Well yesterday I was provided the alert below from my Facebook feed (this post isn’t about FB – but wasn’t that a beauty move last night?)
FB was politely reminding me of a post from 10 years ago – 25th July 2008. It made me smile – because I knew exactly what trade it was reminding me of. Fancy that – after 10 years and thousands of trades – I still remembered the exact trade that my post was about. Is that a) weird, or b) superb or c) a sign I need to get a life and a wife? (Maybe it’s all three.)
So what was my post about? It was about a short in the Dow Jones that I had been running for several weeks from back in May – throughout July price was grinding north, and I was getting a little nervous that I had overstayed my welcome and that the trade was about to be profit-stopped out.
So lets take a look at a chart and I will share my successes and failures from that trade.
Behold this is the Daily chart of the Dow Jones from the summer of 2008. Lets add some context. The Summer of 2007 was when the credit crunch began. How do I remember? Because I was in Verona to watch the Opera Carmen and L’Arena (yes, you’re right, I am much classier than I look.) It was whilst there that the credit crunch began – there was a couple of weeks of volatility and then the market calmed down. In fact people forget that after the credit crunch began the Dow actually climbed to new all-time-highs reaching its peak in October 2007 just a sliver under 14,200. After that it was all downhill, of a sorts. (Take a look at the weekly chart of that time – it set-up as a nice head and shoulders pattern)
If I’m honest I cant really remember anything major about trading during the early part of 2008. A quick look of my notes shows trading UK Equities, FX, Indices and Commodities (basically Gold). I would intra-day trade FX, but trade all the others off the Daily Chart. I don’t recall any sense of foreboding or imminent doom in the first half of 2008. But I’ve learnt with time that market collapses are a bit like geo-political collapses and Arsenal Premier league challenges. Things happen slowly at first, and then things unravel really, really quickly!
What got me interested was end of April and start of May 2008 the price on the Daily Chart rallied upto the Daily 200 MA and printed a Double Top / M pattern / 123 – call it what you will. This was my short trigger. It was also back up towards the area of the weekly neckline. Nice easy trade. I shorted the second pin bar off the 200 MA and then also an additional trade when it broke point 2.
Price moved down nicely and I was happy when it broke the support area in the region of 11750. When price came back north form the 11000 area in mid July I was worried that the move was over and I was going to give a lot back (my stop was about 25 ticks above 12000 at that time). It was after it came back and touched that line in mid-to-late July that I posted that FB entry. For the remainder of July and August I watched price grind north. For most of August it knocked about a range of 11250 – 11750 but as September took hold the daily ranges started to get larger and the swings wider. We also started to have bad news seeping out. This is when I ended up closing the trade around the 11,250 mark. To be honest – I think I got spooked out – the news through September was getting worse and worse – and the markets reaction were becoming more volatile. At that time I was also trading money for other people and it just seemed a good move to lock in a healthy profit for me and clients.
So I traded down from approx. 12960 (1st trade) to 11250. That was a fine trade. However within 4-5 weeks of my exit the Dow was trading down at 8000! Woulda, coulda, shoulda!!
The blue arrow is pointing to Monday 29th September, an interesting day. However Ive written enough for this piece so will save that for another day.
Hindsight Super Trader
What I did do also was when re-taking a look at the charts I started adding all the add-on trades that I missed. There were plenty…….but then there always are in hindsight! God its so easy to trade in hindsight.
But its no bad exercise to look at past trades and see what can be learnt from the experience. It’s 10 years on since that trade. I believe myself to be a far wiser, smarter trader now than back then (I truly believe that experience counts massively for private traders – its just that most people don’t last long enough to learn that.)
I scribbled on some additional add-ons here.
So was I a good trader for my initial position? ( I think it was a lovely, and very natural, trade set-up for myself.) Or was I a terrible trader for being spooked out of my position and not riding it through the great crash?