I did something stupid today, I broke my own rules.
I've been, rather successfully, playing the volatility in the market. I have avoided playing the long side since it is extremely hard to do in this market , but when the market touched a low and bounced, I decided to go long the market. I bought SSO at $21.62 a share. I was willing to take a 10% haircut on this, which would have put me at $19.42.
But one thing I have followed during the last few weeks was to not be on the wrong side of momentum in the last hour. You see, this market has consistently accelerated in the direction of the day in the last hour. That is, if the market was up the whole day, it goes even more up in the last hour. If it was down, it goes even more down. When I bought the stock I told myself I would not be on the wrong side of the momentum at the end of the day. If the stock was down, i would get out before the last hour.
The stock actually touched $22.71, and I should have gotten out when it did. Unfortunately, I was waiting for $23 and it never came. Well it became noon, the last hour of trading, and I froze with indecision. I couldn't decide what to do, even though my own rules told me to get out. At noon, the stock was right around $20.80. The trend was down, and I should have taken my losses and gotten out. I didn't. The stock, predictably kept going down. I did a rookie mistake, and kept waiting for the stock to go up just a little more so I could get out. It did not. The stock went right though my out point and did I sell? No. I held on to it and saw it touch $19.10. Some sense finally did return to me, and I sold half the position at $19.62. That actually ended up being a local maximum, and the stock dipped below $19.00 before settling at $19.10 for the day.
One day, about $1000 lost. Pretty sad if you think about it. I really should have limited my losses better but I did not. I could still lose even more considering I'm not out of the position yet.
The moral? Know your rules. Stick with them. They are there for a reason.