2348 points lower in 13 Days—18% Drop???

  • Posted on: August 9, 2011

On July 22, 2011 we had a high tick at 12,749 in the Dow Futures. Last night’s low at 10,401 came at around 2 AM, Fortunately for me, I was sleeping and missed witnessing that tick first hand.

My long position at 10800 was long since exited, thanks to my stops. I had only wanted to risk a certain amount. That stop was triggered. We settled to day at 11,215, which would have been a 400 point profit. But at what cost?

I am glad I took my loss.

Taking a loss is key to long term success trading. Money management is the key, more important, I believe, than trade selection.

With the HFT jamming these markets, looking to create havoc for longs and shorts, the only defense is 3 fold. 1) Trade Smaller, 2) Trade less often 3) Trade with wider stops. And you might have a chance.

The article I posted below is an eloquent description of what ails these financial markets. I re-posted it because of that fact. It aptly describes the danger and treachery lurking out there do to the way orders are processed and filled in the electronic age.

I witnessed the market move to electronic from 2002 to 2008. It took 6 years, but the markets have been co-opted by technology.

The only adjustment is to follow my 3 fold approach I just outlined above.

The Dow futures dropped 2,348 point from its high tick on July 22,749. Seriously?? that’s 18% of its “value” what ever that means, in 13 days.

Where’s the bounce higher going to take us? 11,570 is 1/2 way back. Coincidentally its also within 100 pts of the March 17th low from the Japanese Earth Quake… That low was 11,451… Like a Dog returning to its vomit, these old prices attract activity.

That’s all I have to say about that.

CER