Gross PnL: -$14187.
Net PnL: -$14379. Borrow fees were $301, so I'm not sure how this smaller difference happened.
Blowup day, will go through in monthly review how much of profits I gave back - not anywhere near all thankfully because I was on a fantastic run.
Before going into details. The most important thing here is that if I hadn't gone above my max size plan, I would have lost $5300 less - which is pretty significant. The reason it is significant is that the next day SPU behaved according to plan and I would have made $3000-$4000. So net loss over the two days would have only been around the $5000 mark. But as a direct result of going over max size, was forced to take a few days off - thus missed the opportunity.
Note that the $5300 less comes from having a position size of 4000 shares on the long SPU (instead of 10000), and 4000 shares on the short SPU (instead of 6000). In reality I may not have tilted, given smaller more controlled drawdowns and so may have lost even less.
I will ignore all trades apart from SPU - because they simply aren't significant enough to go through. So what happened? As part of my secondary watch-list I had SPU on it to short if it got up above $9. If it peaked out and presented a nice opportunity (rather than random spike to short into) I was prepared to do quite big size (4000 shares). So SPU spike up quite hard and I shorted 1000 shares. Unfortunately this was a news driven event, so it rallied a lot further - and I experienced a pretty big drawdown on that 1000 shares.
In general I am prepared for a big drawdown on 1/4 position size, but this definitely tested that idea. Still if I had been super cautious with my adds, it would have been fine.
$10.70 was the prior days high. It would have been a great idea to short around this level with a goal of covering most quickly as a scalp. If I had been onto this from the start it would have worked fine, instant 70c+ pullback. Then it did it again, resulting in a 40c pullback, 3rd time it broke through. I was far too slow, and did it on the second time, then went max size on the third time for some stupid reason. This is especially stupid for a few reasons: (1) I missed the cover on the pullback. (2) Stock moving too quickly to expect a reasonable way to control risk. (3) It was obviously heading higher, the idea here was only a quick way to cover some risk.
It eventually gave a nice stuff movement on the rally higher, and I felt comfortable adding more - this time with a defined stop against the high. I added 2000 shares here (position size of 6000 shares). This is a great spot to add, and it's where I should have gone from 1000 shares to 4000 shares. Or from 2000 shares to 4000 shares.
There was a really key moment, which I have circled on the charts. At this moment I hypothesised that SPU should go up, have a fake-out and then close below $11.00. This is exactly what EGLE did the other day (pictured included). Under this hypothesis the idea would be to get down to at least 1/2 size, or even 1/4 into the first vwap test; and then add on the fake-out (with a stop above the high), or add below vwap once trend is established and there is additional confirmation that it'll close low.
I didn't act on this plan, as a result of greed and fomo. From there it all went to shit, and I flipped long near the highs, added as it held near the highs (which is the lower high that I would have been shorting at), and ended up stopping near the lows (closed near the highs). Having size on makes more susceptible to minor moves in the stock price.
The long hypothesis was actually very well thought through, but the entries I took weren't the proper entries (fomo, greed, zero risk control).
So big mistakes were:
(1) Greed - having massive fomo of missing a big move.
(2) Discipline - going over max size, and no having a clear control risk plan.
(3) Patience - having fomo for each move, despite each trade idea actually being a good idea. Correct execution on the long and short would have made money both directions.
Essentially there is no reason I couldn't have made money today - all the faults were in my head. That being said, I believe in this instance they all stem from the poor discipline; because if I wasn't oversized the emotions wouldn't have come up so much with the crazy fluctuation in PnL.
I can see remarkable similarities between today and my last big losing day on the 12th (aside from the going over max size part). Detailed here: http://williamtrades.blogspot.co.nz/2016/08/trading-review-08-12-2016.html
On the 12th I was trying to add to a winner too aggressively, because of greed, fomo and lack of patience. Today I was too big, with a poor entry because of greed, fomo, lack of patience, and poor discipline.
One of the best things I think I can do is continue to work on these things. In this case they are a result of continued success I have had recently. Greed, fomo and patience will always be a problem. However, going over max size is stupid and cannot happen again.
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