Monday, October 6, 2008

margin call + black monday #2 (or just next monday:)

no money? no friends? no future? no hope?

NO WAY !!!!! at least my broker still loves me, just look into my inbox :o)):


well, my account is broken, the battle lost and about 200 euros away. could be worse, isn't it? how much worse? it could start to rain!! folks, but the war is not over yet! let's analyze the mistakes, let's find some new ammunition, let's take some break to recover (at least till next (black:) monday :-) and LET'S FIGHT AGAIN !

lessons learned: ooops, on friday i've learned that it was very healthy for my account TO HAVE STOP-LOSS-ORDERs in the market when trading DJIA (see trade #12 in http://jarogruber.blogspot.com/2008/10/2008-financial-crisis-not-just-subprime.html). folks, do you think i should use them also when i trade commodities? even if orange juice quotes @ 81.6 cents (= 3 years low), natural gas @ 7.21 (= very, very low), silver @11.15 (= hell, this is damned low!), coffee @ 121.7 (= 2 years low). should i? is this what u think? yeaaah?

if you are so clever then tell me, why ends larry williams his book 'long-term secrets to short-term trading' with the words: 'allways use stops.' why? why? come on, why? do you know it? i've proceeded just to page 149 of 317 right now, so there is still some hope to understand larry's words ...

hell! i've just looked @ my foreclosed account and it suddendly dawned on me! now i do understand! now i do know what's to do:

I WILL ALLWAYS USE STOPS IN MY TRADING ACCOUNT !!!
why? because i can never know how far a price for an item will fall (resp. rise), but i can allways know how much money i'm willing to lose on a particular trade! damned hell!

thx larry.
yours,
j.


x--------------------------x
... some market data ...
x--------------------------x
dax .......... -7.07% 
tecdax ...... -11.27%
nikkei225 ... -4.25%
s&p500 ...... -3.85%
nasdaq ...... -4.34%
oil (brent) .. -6.11%
corn ......... -6.61%
suggar ...... -5.33%
soja ......... -7.06%
eur/usd ..... -1.17% (a new 52 weeks low for eur against the usd)
gold ......... +2.65%
x--------------------------x


yep, here is the overview about the liquidation of my positions (we will not call that 'trades' today, ok?):


item--------------: tecdax30 >> position closed
units--------------: 1

order type--------: liquidation
trade type--------: long
entry date--------: 09/29/2008, 12:58
entry price-------: 699
initial stop-loss--:
new stop-loss----:
exit date---------: 10/06/2008, 15:16
exit price---------: 605
profit / loss in %-: (13.45%)
profit / loss------: (94 euros)
reason why + strategy: well, i had an long time limit order in the market. i didn't believe anymore that it could be filled as the german technology stocks index quotet already @ 750 euros. later in the evening fell the index price to unbelievable € 640, a daily loss of more than 7% (it's nothing compared to nasdaq100's -10%, isn't it?)
lessons learned: a very bad trade. a very big loss (13.45%). this position could recover the next few days and turned itself into a virtual profit, but the price didn't go high enough to allow me to place a stop-loss-order above my entry price. i've also expected at least a short-term stock market rally because of the huge bailout on financial institutions ($700 billion) which has just passed the u.s. congress. well, Mr. Market had a different opinion and crashed despite all good news ... thx goodness was that position liquidated as the next day fell the price additional 10% to 543 euros!!!
=> if the market wants to go in opposite direction as i do anticipate then i should accept its decision => what's the easiest way to assure it? probably to use a stop limit order from the beginning of EVERY trade!


item--------------: toronto60 >> position closed
units--------------: 1
order type--------: liquidation
trade type--------: long
entry date--------: 09/29/2008, 15:15
entry price-------: 699.9
initial stop-loss--:
new stop-loss----:
exit date---------: 10/06/2008, 15:16
exit price---------: 611.2
profit / loss in %-: (12.67%)
profit / loss------: (88.7 cad)
reason why + strategy: well, i had an long time limit order in the market. i didn't believe anymore that it could be filled as the canadian stocks index quoted already @ 765 CAD two days before. later in the evening fell the index price to unbelievable 666 CAD.
lessons learned: a very bad trade. a very big loss (12.67%). this position could recover the next few days and quoted near my entry point, but the price didn't go high enough to allow me to place a stop-loss-order above my entry price. i've also expected at least a short-term stock market rally because of the huge bailout on financial institutions ($700 billion) which has just passed the u.s. congress. well, Mr. Market had a different opinion and crashed despite all good news. the next day fell the price a little bit lower to 591 cad, then could recover to 598 cad as many commodity stocks in that index supported the late increase.
=> if the market wants to go in opposite direction as i do anticipate then i should accept its decision => what's the easiest way to assure it? to use a stop limit order from the beginning of EVERY trade!


item--------------: orange juice >> position closed
units--------------: 1
order type--------: liquidation
trade type--------: long
entry date--------: 09/25/2008, 15:03
entry price-------: 92.2 cents
initial stop-loss--:
new stop-loss----:
exit date---------: 09/25/2008, 15:03
exit price---------: 80.6 cents
profit (loss) in %-: (12.58%)
profit (loss)------: 11.6 cents => ($116)
reason why + strategy: well, in my opinion is mr. market trying to build a bottom in the orange juice price. let's bet on that!
lessons learned: HUGE loss as the market price fell much deeper as i could imagine in my worst dream => in my next trades i will use a stop limit order from the beginning of EVERY trade!


item--------------: orange juice >> position closed
units--------------: 1
order type--------: liquidation
trade type--------: long
entry date--------: 08/15/2008, 15:11
entry price-------: 104.3 cents
initial stop-loss--:
new stop-loss----:
exit date---------: 09/25/2008, 15:03
exit price---------: 80.6
profit (loss) in %-: 23.7 cents => ($237)
profit (loss)------:
reason why + strategy: i felt that the price of orange juice is soooo cheap (temporary high in october 2007: 160.80 usd), therefore i've opened an initial position and didn't set a stop-loss order
lessons learned: a HUGE loss as the market price fell much deeper as i could imagine in my worst dream => in my next trades i will use a stop limit order from the beginning of EVERY trade!


item--------------: natural gas >> position closed
units--------------: 1
order type--------: liquidation
trade type--------: long
entry date--------: 09/24/2008, 11:57
entry price-------: 8.09
initial stop-loss--:
new stop-loss----:
exit date---------: 09/25/2008, 15:03
exit price---------: 7.04
profit (loss) in %-: (12.98%)
profit (loss)------: 1.05 => ($105)
reason why + strategy: well, i had an order @ 6.96 which wasn't filled for few days, oil was rising strongly, natural gas also 2 days in a row. well, i've thought that the winter-rally in natural gas just started and didn't like to miss to increase my planned position at these still quite cheap levels... therefore i've decided to buy 1 contract 'market' before the opening in usa. wooop, after climbing to 8.19 fell the gas price nearly 7% to the market low @ 7.63 ==> ==>
lessons learned: a HUGE loss as the market price fell much deeper as i could imagine in my worst dream => in my next trades i will use a stop limit order from the beginning of EVERY trade!


item--------------: natural gas >> position closed
units--------------: 1
order type--------: liquidation
trade type--------: long
entry date--------: 09/22/2008, 18:37
entry price-------: 7.63
initial stop-loss--:
new stop-loss----:
exit date---------: 09/25/2008, 15:03
exit price---------: 7.04
profit (loss) in %-: (7.73%)
profit (loss)------: 0.59 => ($59)
reason why + strategy: well, i had an order @ 6.96 which wasn't filled today, i've missed a better entry point (because of my office job :o) in the early afternoon @7.40, so i 've opened an initial position @7.63 in the evening. i will place 2 additional buy orders @6.66 and @6.06 and thus participate in the seasonal winter rally :o))
lessons learned: this is still a too big loss as the market price fell much deeper as i could imagine in my worst dream => in my next trades i will use a stop limit order from the beginning of EVERY trade!


item__________: silver >> position closed
units__________: 1
order type______: liquidation
trade type______: long
entry date______: 09/17/2008, 18:33
entry price_____: 11.80
initial stop-loss_:
new stop-loss___:
exit date_______: 09/25/2008, 15:03
exit price_______: 11.26
profit (loss) in %_: (4.57%)
profit (loss)_____: 0.54 => ($ 54)
reason why + strategy: today's sell off in stocks and especially in financial sector (nasdaq100 dropped -5.31%, dow -4.08%, AIG -45.33%, morgan stanley -24.22%, wachovia -20.76%, ..., goldman sachs -13.92%, ...) and my slightly higher overall account size (because my remaining silver position increased already about +9%) allowed me to buy a 2nd silver contract at 11.80 usd. well, i could also buy it at 11.44 half an hour earlier but i just returned home from my office and preferred to have a dinner and to think about possible trades :-)). folks, even when i've entered the silver market soooo late, the price moved intraday up to 12.13 (!!). when will i sell this position? hopefully at much, much higher levels, maybe somewhere between 15 and 20 dollars :o))
lessons learned: this is still a too big loss as the market price fell much deeper as i could imagine in my worst dream => in my next trades i will use a stop limit order from the beginning of EVERY trade!


item___________: coffee >> position closed
units___________: 1
order type_______: market
trade type_______: long
entry date_______: 09/18/2008, 15:00
entry price______: 133.9 cents
initial stop-loss__:
new stop-loss____:
exit date_______: 09/25/2008, 15:03
exit price_______: 115.0
profit (loss) in %_: (14,12%)
profit (loss)_____: 18.9 cents => ($ 189)
reason why + strategy: i considered to jump into the market as the coffee price was near the 52 weeks lows and there is usually a strong seasonal picture moving coffee much, much higher to the end of the year ...
lessons learned: a HUGE loss as the market price fell much deeper as i could imagine in my worst dream => in my next trades i will use a stop limit order from the beginning of EVERY trade!


the question of the day: WHY fell commodity prices soooo deeeeep?

  • margin calls or need for liquidity in general seems to be the main reason for the current sell-offs in commodities. in that case are hedge funds, banks, private people like forced to sell everything they have, regardless on its price. if they do not (like me) the brokers could and should sell themselves the assets of their clients. thx goodness, cmc sold all my positions, otherwise there would be even a higher loss on my account :o((.
  • the 2nd important reason could IMHO be the assumption that the coming recession will be longer and more difficult than originally anticipated.
  • then we still have a stronger usd comparing to other major currencies
  • and maybe have been the commodities also a little bit too expensive in february/march of this year ...
well, it's not a tasty cocktail for commodity bulls like me ;o((. but what surprises me most is the fact, that even in epicentre of the current financial crisis are the precious metals soooo cheap and falling further. i think, there was probably just 1 real exception (= real fear in the market!) to this 'behaviour' as on wednesday 2 weeks ago (or is it already 3 weeks ago?) the actors on the financial markets suddenly 'dropped' u.s. treasuries and moved to cash + gold. btw, i believe that this was the day where gold jumped 90 usd higher in few hours (or minutes) for its highest daily gain and bernanke/paulson announced the proposal for the $700 billion bailout in the last 1-2 hours of trading day for the first time ...

damned hell! by watching all these huge losses it is so clear to me that the main reason for my failure was the fact, that i couldn't imagine the huuuge sell-offs and didn't accept Mr. Market's opinion. THE MARKET IS ALWAYS RIGHT !!! folks, i can never know how far a price for an item will fall (resp. rise), but i must always know how much money i'm willing to lose on a particular trade! THEREFORE:
I WILL ALWAYS USE STOPS IN MY TRADING ACCOUNT !!!

i hope i will remember this lesson forever :o))
eof
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