today's mistakes

Today, I did something I do often. I start out with one trade idea. I attempt to lower my risk by going small, but then my exposure is small. I cant stand the thought of having small exposure if this is going to be a successful trade. So I increase my exposure by putting on other small positions in related trades. This way, I believe i am attempting to deceive myself. It looks like a few low risk trades but its still all one basic trade, and its still a lot of exposure and risk. So the risk is harder to see, but its still there. Then often, like today, when the trade goes wrong, I end up losing way more than I thought I was risking because of the confusing exposure.

I think the better approach is to just put more exposure on of the 1 trade that i think is most likely to benefit from this anticipated move. That way, the risk is much easier to see, it is where my stop is. I have to remember to do that because that way my plan is more obvious, leaving less to interpretation. Also, I know how much i will be down if the trade doesn't work out, something that is a mystery with the other technique. I have to remember, if its just one trade, i must force myself to concentrate all the exposure in one etf or stock.

*The one exception to this would be if its a trade based around an index, and the index doesn't have a thickly traded corresponding etf. In that case I have to trade the index but do so with a basket of it's thickest stocks. This is what I attempted to do with my airline trade, and it brings me to today's mistake number 2.

Today's airline trade would have been a wonderful profitable trade. I saw the airlines rolling over and breaking yesterdays low. I then sent a basket of the thicker airlines short, but because I was afraid to pay up too much I sent it limit away from the market, and then only ended up getting filled on one of those stocks and then barely making any money in it. I think if i am going to be trading the index with a basket I have to trade it at market so I can avoid partial fills that throw off the risk/reward calculations. So that is the lesson I learned with that today.

Finally, an observation. If i am going to be basing a trade on some other security, like today's long in the SPY/GDX/XME (see mistake #1) based on the action i observed in the FXE, I need to see that the action is significant. The FXE was showing strength which i felt boded well for the three stocks i bought. But the problem with that was that despite showing some strength, it was still stuck in the middle of yesterdays range (after having dipped below and then bouncing) Because of this, the strength wasn't really that significant and wasn't going to pull up my stocks with that action alone. In fact, the FXE was pulled back down from general market weakness. In the end, the strength I had observed was probably useful, because the FXE didn't make a new low when the ES #F did, and that divergence may have been a contributing factor to a nice bounce in everything i had dumped at a loss soon after. So perhaps the proper way to go about it if the move is not significant, would be to wait for a divergence then make a trade with good risk/reward due to the divergence as a catalyst. This begs looking into in the future. for the time being though, put any non-significant move as a reason for a trade on hold. I hope to observe a few trades like this and coming to some conclusion that will enable me to do craft a setup like this in the future.