CVA WM — Dealing With a Losing Trade

I posted two winning trades here and here.  Now it’s time for a loser.

I’ve consistently been trading this spread from the long side.  I managed it as best as I could given how badly it has trended from day one.  I’ve been staring at these symbols in my position monitor off and on for months.  The pair used to have some decent volatility which allowed me to trade around the position.  Lately, volatility has dried along with directional movement so I’m done.  Actually I still have a tiny position, a half tic-tac sized one, to keep me interested in case this starts rolling again.

I did not get stopped out of the trade in a traditional sense, I was stopped out because too much time had passed without validating my reason for getting into the trade.  As you can see, the pair has been on a down trend with some decent pops along the way.  The last leg down made new lows and it has basically gave no indication that there is strong support at the new levels.  I look for a strong reflexive bounce in a new area of price discovery, not for the spread to roll over and play dead.  This is a good tell for me.

(Daily Chart, click for larger version)

In the five minute chart I noted the areas that I reduced my position.  I took off the position on any pullback offered.  I was a little bit sloppy, but I managed to remove four units of capital.  There are better opportunities for me in other trades.  For the record, I have been working this position from the -$2 area.  We are now trading in the -$8.50 area.  Ouch.  Not that bad, considering I’ve been in and out dozens of times.   But not good either.  This is why I will never put a trade on and just set it and forget it. I have to have the leeway to trade around a position.   Comments are encouraged.

(5 Min chart, click for larger version)

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