I'm trying out new new methods as my trading skills and insights continue to develop. While the new strategies show great promise, I had to relearn the lesson of not being too overconfident in one's approach and to lock in profits.

In a nut shell, I made some good gains this month, but wound up giving it back through a combination of analysis errors and poor trading management. As a result, this month become more about "learning" than "earning".

The angle of the ramp up and declines show the speed in generating profits of losses in this market- danger and opportunity lurking together.

This month's lack of performance can be attributed to one thing - overconfidence. I'm usually wary of placing too much confidence in my trades, but I let my guard down as I thought I had a "near certainty" of where the market was headed, so I paid no attention to the pull back. That resulted in a humbling round of relearning that no matter what, you should always have an exit plan to preserve profits made.

Lesson #2 two is new methods bring new caveats with them that I need to account and plan for. Along with the caveats comes additional opportunities that I also have to be ready to take advantage of.

While it wasn't a good month for gains, I did learn a good amount from market activity and additions/corrections I need to make with my new trading strategies.

October Performance Vs Indices

Both Fox and MSNBC have projected Obama to be the winner with 274+ electorial votes and CNN is still counting....

Give it up Blitzer....1st you miscall the Health Care Supreme Court judgement, now you veer to the other side and drag out a decision that the other main sites have already concluded.

Before the election, I've had a lot on my mind and I don't have time to write full blogs for each subject so I'll just list them out in one "outlet" post:

1) Hurricane Sandy and tragedies like it can bring out the best in people, but it also brings out the worst. It's disheartening and enraging to see people sink to the depths of predators taking advantage of the misery and misfortune of others. They are many accounts of looting going on in the areas impacted by the storm. And not just straight up looting, but thought and energy is being put into it. People are being caught with diving and snorkel gear that were planning to steal submerged valuables. A person posing as a Red Cross worker was found to be actually casing homes for things to steal.

There are also listed "tweets" of those getting "excited" about the prospects of taking advantage of the storm while requesting others to join in their criminal plans.

You have to wonder when tragedy strikes, what makes one person think about helping those in need while another thinks now is the time to strike for personal gain? The harshest penalties should be reserved for those type of rats.

2) This election season makes it even more apparent that despite the ease and fluidity we now have of getting and receiving information, the dark side is misinformation abounds as well. There are sites that will support whatever you want to believe as opposed to the actual facts. To make matters worse, most main stream media drops the ball by refusing to take sides and call out the lies from the truth.

Most unbiased polls show Obama as leading by a good margin, but to hear main stream media, it's a neck and neck race. And propaganda station Fox has their followers thinking Romney will win by a landslide. I worry that these people are going to wake up angry and violent on Wednesday if the polls hold true and Obama wins.

You also have right wingers saying the same thing about the left if Romney wins, but the main stream media isn't projecting an Obama landslide, or even an advantage, so if he loses, the shock factor should be low to the masses.

3) I am forever perplexed at people being fooled time and time again into voting against their best interests even as what little they have continues to be whittled away. The problem is too many people in the ship with holes that is sinking think they are members of the Yacht club.

4) I'm seeing quite a few articles justifying price gouging in disaster areas- here's one. Simply put, this is just a pile of crap. You can be sure those trying to push such a "free-market" policy have enough money to be able to afford the resultant sky rocketing prices.

A weak attempt is made at using the concept of "supply and demand" curves to naturally regulate prices and that those who couldn't afford it would just wait until process dropped, letting those who really need it get better access. What this ruse DOESN'T cover is that many people who are truly in need would be shut out of the system because they couldn't afford it.

A person making $20K a year is more desperate to get gas so they can get to work than someone making $200K/year but these "let price gouging happen" folks don't seem to realize that- or probably closer to the truth is that they just don't care. Greed and elitist attitudes are the primary causes of most revolutions but mankind never seems to learn from their mistakes.

I likely wouldn't be entering an update right now if not for Hurricane Sandy. I would have been in NYC working some other tasks but the storm caused massive amounts of flight cancellations which included mine.

NYC got rocked bad by Sandy and it wasn't even a direct hit. The market was closed for two days as many areas were flooded out. The electronic futures market was still open for trading.

NJ got the worst of it with a direct hit, but both cities are reeling largely because they aren't really expecting to face Hurricane landfalls and don't have much experience unlike the southern areas of the country. Hurricanes and Tsunamis are two things that strike fear in those leaving near coastlines.

The one-two punch comes with cold Canadian air now dominating the weather pattern so winter temps have arrived with many folks with no power or heating. The more technical we become, the more dependent we are on electronics so extended power outages become more traumatic.

I hate paying for my land line phone, but it's communication insurance when the regular power is gone. Most people don't realize that cell phone towers only have a limited back up supply so if the outage lasts more than a few days, cell phones become useless. Also for those that sign up with their cable/internet company for phone service, no power means no phone.

Not much trading action from me this week as my main trade from last week is still in progress. Made several short term mistakes while focusing on long term targets. The short term mistakes come from failing to work the short term market fluctuations as the market moves back and forth. I need to remember that the further away a price target is, the more random the path the market can take to eventually get there. I need to keep some focus on the short term to keep extracting profits and reducing risk. Watching my account go up by a good amount, then give it back, then repeat makes it clear how much I "didn't make" by not taking advantage of the short term moves.

My only closing trade this week was a mistake when I accidentally executed a market order instead of deleting it. Fortunately the loss wasn't bad, but if I had properly traded the right way, it would have been a $300+ gain instead of about a $140 loss. Oh well, gotta watch out for that fat finger error. 

Oct 29 - Oct 30 compressed into 2 minutes:

It captures the increasing winds, clouds/fog and rain as well as the power outage that leaves the city dark.

This was a week where I'm continuing to test and focus on my swing trade entry and and exit techniques that have been refined throughout the year. Day trades are okay, but just one great swing trade entry and exit can make the entire month a successful one. Being able to capture more of these can easily move one to much higher trading income levels.

Of course every point of light has a corresponding dark side - misplaying a swing using wide stops can result in some significant losses -wiping out  a week or more of good gains. Stops have to be wide because the market is volatile and tight stops will likely be triggered prior to the big anticipated move.

Damage can be minimized if leverage is kept low, but that will also minimize the gains as well. It's best to figure how much you would be willing to lose in order to determine the amount of gains you will be shooting for.

Using my methods, I entered/scaled-in a counter-trend at what I thought would be a safe reversal point, and after a while of prices drifting/consolidating, they moved as I expected and in no time I had strong gains. It was close to the smoothest entry I've made in recent months and felt good seeing the quick gains. Unfortunately, the trade was working so well that I failed to even consider taking a  more conservative exit as I was certain it was going much higher.

As time went on, the trade started giving back some gains, but I wasn't worried, thinking this was just regular minor pull back  prior to a continued move up. Long story short, it was more than a minor pull back and I wound up giving up all my great gains and moving into sizable losses. Further analysis shows I missed several key target areas for exiting with those gains intact. No one to blame but myself, but as with all mistakes, it serves as a good learning point from which to build on. The trading performance of those moves will show a spike up followed by a bigger spike down - more super sized trading volatility I've been trying to cut back on.

That left the remainder of the week focusing on my trading plans versus market movement to make sure the two were in sync - a much tougher job when the PnL is down instead of up. Decisions have to be made to adjust a trade or close it out. The market of course makes it difficult because you have to deal with the human emotions of fear of loss as well as greed. Those two emotions are the reason why so many traders/investors fare poorly.

The interesting thing is failure/success and losses/gains go hand in hand and both need to be accepted and embraced in order to succeed. Some of my greatest trading gains were initially big losses before they reversed. Trades that turned out to be big losses have also taught me a great deal to improve my performance. You can grow complacent when trades are going well, but when the pressure is on and the stakes grow higher, the level of concentration grows with them as one tries to determine the likelihood of future market direction. 

Playing it super safe with only small risk would keep my losses minimized, but would also eliminate the extended "sweat" analysis that I needed to move to getting greater consistency.

So far the main trade is still in progress with only minor gains from adjusting my CRM options positions by covering some options calls I had shorted.

Twenty five years ago on this day, the market experienced its largest single day percentage drop ever- a fall of 23%. It was to become known and branded as Black Monday.

I suppose the market wanted to celebrate this "special day" by having a mini crash. The indices were all red today with the Dow down 1.52%, Nasdaq down 2.19%, and the S&P 500 down 1.66%.

As a comparison for how bad the crash in 1987 was, the Dow dropped 205 points today, but an equivalent drop to 1987 levels would be over THREE THOUSAND points in one session.

Still, the market had a decent drop today and anyone on the wrong side of the move got stung good. This week the market did what is does best with undulating in ways to fake people out.

The good news is I was not long futures when the market dropped  like a rock. The not so good news is I was actually short futures, but closed this morning before the market dropped, thinking I was at risk for a reversal move up. So I picked up some profit, but not the big windfall I would have if I kept my position open.

I wasn't the only one as I saw many trader posts online lament about exiting way too early. Even worse, I bet some were drawn in to go long...ouch!

The overall news is still good since  my main objective wasn't looking to short, but rather go long so I'm happy I decided to wait for confirmation rather than being too aggressive. It also doesn't annoy me since these type of moves are becoming more commonplace so there will be plenty of opportunities to capitalize on future moves.

Despite missing the bulk of the big short today I had a great week since I did catch the big move up that began on Monday.

Big drops like today also mean opportunities since stocks just got a nice discount. Weekend assignment will be to look for potential long candidates.

Have some other tasks that need to be done so my posts will be running light the new few weeks.