Usually I take a breather after making one bad mistake, but not this time. Oh no! This time I make two more mistakes in a row. So here is how it went down.
After last weeks 26% loss on 5 QQQQ 20110122 $54.00 puts, I try to leverage a win in the opposite direction by BTO 10 QQQQ 20110122 $55.00 calls on December 13, 2010. That didn't work out as planned and I end up with a 20% loss on December 15, 2010.
But the bad news doesn't end there. Instead of learning my lesson, and seeing that a very tight sideways trend is forming, I try to leverage yet another win back in the bearish direction on the heels of my calls being STC. I entered a position of 10 QQQQ 20110122 $53.00 puts on December 15, 2010 just to be stopped out again today, December 17, 2010 for a loss of 32.5%. Why so much? I didn't set my stop until after I saw that today wasn't going to be a bearish day.
The only saving grace is that I didn't put all of my available capital to work all at the same time. It was pretty much half in both directions. So I averaged down my loss to only 25.6% total for the week. Would have been much better if I had set my stop by calculating against the high of December 15th like I was suppose to. Then I would only of had about a 17% loss for the week.
So here is the plan. If I do get back into the index it will only be after it breaks out of this trading range by a percentage of its ATR. I am thinking something like 10 or 20 percent. That is my opinion, you can take it or leave it. Disclaimer: See bottom of page. http://investorsopinion.blogspot.com/
ATR - Average True Range / Average Trading Range
BTO - buy-to-open / bought-to-open
QQQQ - PowerShares QQQ Trust ETF
STC - sell-to-close / sold-to-close
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