Trading $TVIX and knowing when to leave it…

Today has been a fairly lacklustre Monday for the Stock Market, slow and choppy pricing action and nothing that I really like hitting my scanners… so it could have easily been a red day, or a no trades day. My first trade was a failed attempt on $AQMS that didn’t give me any continuation on a pull back entry, and I ended up stopping out for a $500 loss. The volume dropped off and it never really looked likely to come back, and as you may know by now I don’t stick around waiting/hoping for a turnaround… the longer I’m in a stock the more at risk I feel. All trades have to play out according to the plan, and if it hits my stop or just dries up then the plan says I’m out and waiting for the next setup. Which is exactly what happened.

The market has been taking a serious hit lately, and whilst this can sometimes restrict a long biased traders options as it can have a knock on effect with other stocks, it can very often mean that $TVIX is good trade. When I trade $TVIX (VelocityShares Daily 2x VIX ST ETN) I do it very differently to a normal stock. I’m not looking at it in isolation, using the normal levels of support and resistance, I use it is as an inverse to the $SPY. I’ll have both charts up and I’ll be basing my entries on the spikes into resistance I see on the $SPY chart as if I’m looking to short it, but will then dip buy for a quick piece of the move up on $TVIX. So effectively I’m looking for the opposite of the $SPY pricing action to be happening on $TVIX. As with all trades this is not an exact science, careful judgement, a proper trading plan and a very clear risk/reward strategy needs to be followed, but in simple terms if the S&P 500 is dumping, I’m looking for a good dip buy entry point to long $TVIX for a quick scalp. So today I grabbed a decent initial trade on $TVIX and followed it up with a couple of smaller scalps to make back my initial loss and finish up + $675 on the day, and all within 1hr 12mins of the open.

Now, as the MOMO scanner wasn’t giving me anything, and overall the market was looking very slow and choppy I made the decision to leave it be and walk away green. This level of discipline and patience is what keeps you on the right track. With my initial reasonably hefty loss I could have so easily got frustrated and forced another trade to try and negate the loss, rather than as I did sit back and wait for the quality setup to present itself. Revenge trading, or any trade taken on the basis of emotion is extremely likely to work out badly and just add to your losses. At the same token, being up on the day when things aren’t particularly ideal out there, and then carrying on to simply end up give back some or all of your profits due to poor trading conditions is an avoidable situation. Knowing when to walk away is so important. You are a risk manager of your own account, so why risk your funds on something that isn’t meeting your criteria? Remember, all aspects of the setup need to be there in order to take the trade. If it’s not an ideal setup, it’s not a trade, simple as that!

Let me know how you’re finding out there, and as always, trade safe ๐Ÿ™‚

Laters,

Al

So this is pretty much how my day went:

12 comments

Leave a Reply