Trend Failure....

First off my apologies for the poor picture. I think it has something to do with my computer's screen resolution, which I will try to resolve before future posts.

What a devastating week for me. It can not get worst. The chart above illustrates that even if a trend is identified the market can still go the other way. Case in point. On Monday July 13, 09 I sold iron condors at 915/920calls & 825/830puts for about $0.60 excluding commissions. (I have been selling calls since march and been profiting from 10% to 35% weekly, however I was putting in 90% to 100% of my capital to achieve such profits. I consider this trading style being very aggressive and just down right crazy. Yet I give it my all to reading charts daily in knowing fully what odds I have of failing.) Anticipating on a bigger fall and wanting out of the money options expire worthless I went with the lower puts. Boy was that a huge mistake. The end result today is that the SPX ended above 915 therefore I lose all my capital in the trade. I did not do the exact calculation, but from the amount of options I traded the total loss comes close to $-34,120 not my biggest one sum lost experienced but largest of this year. I am worst of than I started at the beginning of the year. I will log in my mistakes in hopes others and myself can learn from them.

What happened?

Over the previous weekend I had the SPX chart reviewed upon the monthly, weekly, and daily trends. All trends expected a downward for the coming week. There was a head and shoulder pattern as shown on the chart below:

Not anticipating a significant up movement for the week I had the Fibonacci retracement line around $878.91 to $927.28. Anticipating the head and shoulder pattern would result in a right shoulder I went and shorted $915 calls. The 23.6% retracement was right around that value and not think the start of 2nd quarter earning season could be this optimistic the SPX shot upward for the next four days. The market as of 3:45pm EST of 07-16-09 has the SPX stand at 943.08! In less than four sessions the SPX index moved up 64+ points or +7.2%. (Note to self earning season is dangerous for indexes to swing up or down. Very dangerous.)

Mistakes:

1) The risk I put myself to gain 10% was not worth it. Understand if I had the patience and waited out this week I may have executed a lot better trades. I need to build patience, because sometimes the best trades are the ones I never make. This one should have been one.

2) I never done an iron condor trade until now, so this is my first trading the option spread and not knowing full well of its power I got slaughtered. Hey at least I am still breathing and alive. Yet barely. In any case I should have practice the spread before I went in it for real. Now that I have played it I will always remember this trade.

3) Following trends is good when it comes to trading but never put all your eggs in one basket. Again the risk to reward ratio was horrible in the method I choose to trade. Yet I should have know it wasn't a good week to sell calls. Earning season can be so unpredictable. Then again the market is always unpredictable.

4) I could not cope with this lose and stayed home isolating myself. If I had known how much I really could lose in this trade I would not have made the trade. Odds were in my favor at the beginning of the week, but it wasn't when it counted the most. I should not let this get to me, but learn from it. Yet a lot of money just gone out of my account again. I simply can not win. This type of mentality has destroyed my mind & body, and has created so many distractions. I clearly need to get my mind straight before I play again. Its just too much.