For the sake of simplicity, all dollar amounts are rounded in this blog.
- My #1 entry spot was with a break above the 10 day on September 4th, 2013 ($130,000 Position size 50% of account). This was the first day out of 18 that price broke over the 10 day line. In essence, this was a breakout trade out of a range, after the 100 day held as support at $163. With 50% of my account at risk, a 2% fall in the index would have only been a 1% total loss of trading capital, keeping my risk low.
- Two days later, I was able to hold through the volatility because I was using end of day stop losses. My original stop was SPY closing below the 10 day, invalidating the break out. It sliced through, but quickly recovered to close higher.
- Three days later, SPY was able to close above the 50 day with power. I added the other half of my account ($130,000) to bring my position size to $260,000 total. I moved my end of day stop at this point to under the 50 day.
- I held as SPY gapped up, and was in a price base for a few days. I then moved my end of day stop to the 5 day ema. After a few days, it gapped up again to $170 and finished at the low of the day with a nasty black candle. I stayed in and kept my stop at the 5 day ema. In my trading, I have found that one black candle doesn’t mean much. It generally resumes the trend after such a day.
- It did recover the next day after the black candle. I was still in.
- Then came the FOMC day. I had to follow the chart and stay long while it sat at all-time highs with a catalyst on tap. Everyone that wanted out was likely out and waiting to get back in when the coast was clear. Everyone waited for the word taper, when it was steady as she goes. The Spy exploded over $173, then came back to close at $173 on the day. I held, thinking that it could go parabolic.
- No such luck. Buyers were not coming in over $173 on Thursday, and SPY was very extended over the 5 day ema. Since I had already bagged most of my reward, and there was a risk of a retracement back to the 5 day ema, I decided to take my profits and wait to get back in later.
- It was a great trading campaign, and I was rewarded with almost $11,000 profit in 2 weeks.