16 January 2013

US 10yr T-Notes : Right Decision, Bad Result - It's OK

  • Trying to comfort myself with Bob Rubin's words. But jokes aside, this is probably an important post for beginning traders to understand (although these past 2 years I have often felt like a grasshopper myself).
  • Trade : Had scaled into a sizable long ZNH3 position at 131-23 during the sell-off driven by the Dec12 FOMC minutes. Now trading at 132-12 but I was stopped out at 131-19 for a small loss. Low was 131-14.5. 
  • I did not have the fortitude nor conviction to get back in after my stop was taken out. At the time, I was trying to ride the USD/JPY and EUR/USD SHS moves. One's conviction capacity is limited, probably to 2 or 3 positions at any one time. Choose wisely!
  • Entry was based on my long experience as an interest rate trader. There was no technical justification for the long trade. If anything, I should have been short based on pure charts. So getting out of the long ZNH3 position was the correct decision, even though with the benefit of hindsight now, the trade made money. Ex-System, therefore lacking conviction by definition. Hence, I do not feel bad about missing the upmove which I held within my grasp.
  • Moral of story : Develop a system that you believe in, stick to it. Don't let the odd negative result grind you down. "Nolite te bastardes carborundorum" (which I just learnt from the Handmaid's Tale, although I think my ex-boss GH taught me this a few years back).
  • PS : The chart is now closer to a sell than a buy.