Weekly Review 11-22-11

Monthly options expired this week. The draw down continues!

My biggest mistake of the week was held and hoped for my ES 2015 bear call to the end. I throw away my rules and discipline only thinking about give me a down day and I would get out. There was no down day for the week but a continued up thrust. I ended up lossing $1900, 18X of loss for this position. As I indicated in last weeks review and plan I have to overcome the psychological barrier of taking stops at 2-3X of loss. Without this firm rule and discipline I won't make it in this business. For the week this rule didn't stick to me. I must enforce it firmly until it becomes my 2nd natural. I am tired of lose big and win small. 2-3X loss is manageable.

My majority losses are from grains. I kept rolling over my positions. I exited many of the big losers before Oct USDA report to avoid the big drop that many experts were expecting. The record high production ended the low of this year before the Oct report. The long term seasonal charts played out exactly as they had happened before. I exited out these positions based on risk control although the timing was at the maximum pain point. What I didn't have were the specific quantified plan on getting back in and the flexibility of recognizing the trend change. While waiting for the other shoe to drop in Nov USDA report I didn't have both side hypotheses. I was still heavy in short side. Most of my directional put ended up losing money.

My plan for next week:

1. Continue to write out my daily plan in the morning;

2. Take stops at 2-3X regardless what is my outlook of the market direction;

3. Reduce my exposures in grains since I don't have a clear view and strategy of this sector. I will come back later or make my recovery from other markets. I need to ditch my anger or other emotions from this sector. I have to be able to admit that I lost this battle but I will preserve my capital in order to win the war.
 
4. Revisit indices ETF weekly options. The big index options have large spreads and are often hard to get a fill unless the market has a big movement. I will use these ETFs in my personal and IRA account for a short time frame and smaller gains. It's better than nothing with good risk management.