When Cowardice Keeps You From A Brilliant Trade
Tim Knight | Feb 28, 2017 12:57AM ET
I have, over the long lifespan of Slope, mentioned some emotional scars from childhood during that period of time when it seems virtually everyone in my generation had a complete suck time: middle school. It seems that a few random verbal assaults of “fag” or “dick” can persist for decades.
But all the names I was ever called, times one hundred, doesn’t come close to what I call myself, especially on days like today. I have been hurling invectives at myself for hours now, including one that I won’t repeat but rhymes with “You foopid sucking idiot.” Over and over again.
And why would I hurt nastiness at poor, sweet me? Simple: I let cowardice stomp on a brilliant trade.
Back on February 8th, after a few attempts at shorting miners (each of them yielding a small loss), I decided to tilt at the windmill once more with this Slope Plus post. Its very first words were, “I will be the first to admit I’ve been running kind of cold on precious metals calls lately“, so I was making no secret of having blown it recently (again, with VERY small losses), but, not being the quitting type, as I put it in my post, “Instead of staying mute and pretending none of this happened, I’d rather address precious metals head-on again.” I concluded the post by stating, “It feels like the twentieth time I’ve tried this lately (although I think it’s just the third), but I believe my reasoning is on sounder footing this time. We shall see.”
Before we go even one step further, let us “see” – I’ve marked the “buy” point. You can see the 36% rise that took place in the span of under three weeks.
So let’s dial the time machine back to early this morning. Direxion Daily Gold Miners Bear 3X Shares (NYSE:DUST) started off with a small gain on the day, then it started to weaken and went a little red. In this post I wrote, semi-jokingly, “As an aside I’ll mention I sold off half my position of DUST this morning at a nice profit, since Rev is scaring me. If this turns out to be a good move, I’ll congratulate my prudence. If not, I’ll blame Rev. Win/Win!” (this was a reference to a Sloper who, from what I can tell, has been suggesting miners would be strong based on the ATR indicator; since I only read like 5% of the comments, I could have this dead wrong, but that was my impression).
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Well, DUST continued to slide, and I felt sorta/kinda good about reducing my position by half. But DUST’s drop kept accelerating, and although I had cleared a $1,000 profit on the half I dumped, the other half had a $90 loss. Within even thinking about it, I mentally said “f**** it” (excuse my French, but that was the state of mind I was in), dumped that half, and patted myself firmly on the back for making about a thousand bucks.
Well, you know what happened. It went down for a few more minutes, and I went on to other things. Only about an hour later did I notice my short position on AU in a different account was up huge, and I had that oh-shit feeling in which I realized miners must have reversed. So, yeah, Mr. Chartist guy over here had dumped his DUST without so much glancing at any charts, but now that I did take a good look at what was going on, it was clear to me a quick glance at an intraday chart would have prevented me from dumping my position like I did. IDIOT!
I didn’t “confess” to selling this other half since I was so ashamed, but Slope is known for its honesty, so here, in all its gory detail, I have marked my two exit points:
Just to torture myself, I set up a fake entry on my portfolio spreadsheet tracking the net profit/loss from average of those two prices. In other words, how much money I had left on the table. When I first entered this dummy position, the profit was about $3,000, and my stomach was in a knot at my stupidity. You can imagine how I felt near day’s end when I looked at it and, almost to my complete disbelief, it was $11,000.
So, yeah, I felt oh-so-good about clearing a thousand bucks, but it went up ELEVEN TIMES that amount in the span of just a few hours. Thus……..the nonstop verbal putdowns!
The two lessons learned (and NEITHER of these are new to me, but one of these years Mr. Crap-for-Brains that I am will actually heed them):
(1) If you have a solid thesis, as I did on February 8th, stick with it until the basis of the thesis is violated; there will ALWAYS be reasons from the outside to “get out” or abandon the trade (as I say again, ALWAYS), but it’s goddamned stupid to stray from your plan;
(2) For the love of God, if you’re a chartist, look at a freakin’ CHART before you decide to bail on something, just in case you can’t heed rule #1.
I had alluded to this disaster in the comments section, but that turd-hurler Torero yelled at me for “whining”, but I am trying to whine with a purpose. I hope some of you can take a lesson from this colossal idiocy on my part. Oh ,and as for you Slope Plus folks that are not idiots and actually stuck with the trade – good for you! If it keeps going our way, so much the better, although I’ll be absolutely howling.
One final point: I remain short SPDR Gold Shares (NYSE:GLD), Anglogold Ashanti Ltd (NYSE:AU), and Harmony Gold Mining Company Limited (NYSE:HMY) in my “regular” non-ETF account, so if gold keeps falling, I’ll benefit somewhat, but the DUST trade was my anchor trade, and in case you missed the point, I was a moron for ditching it. So pay attention to my charts. They’re wonderful. But IGNORE me otherwise!
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