Ouch. That right there is the best one-word summary of our trading activities today. Bad days happen though and the best thing you can do for yourself when they do is to shake it off and move on. However, you should always review your losing trades closely afterwards to see if there is anything to learn from them. Did you make any mistakes that you can see? Flawed analysis, emotional trading? Or maybe you did nothing wrong and things just didn’t go your way. A loss certainly doesn’t have to mean you made any mistakes. These are the financial markets after all. The mother of all unpredictable variables. Often times we learn the most from our mistakes though so never miss an opportunity to analyze yours. So, let’s get to it then.
We made a total of five trades today, all of them standard high/low options. Of those five trades, four were losers and just one was a winner. Luckily it was a decent-sized winner at least. But it still didn’t come close to covering our losses. Our first trades for the day were on the AUD/USD currency pair, and were entered at 17:18 and 17:28, for $69.8 and $50 even, respectively.
The above image shows the state of things just after opening of the second contract, purchased to bring down our average entry point. And for a while things were looking good, with both contracts fairly far into the money (it shot way up to the 0.90300 level just after this picture was taken). And you can see much better in the ThinkOrSwim chart below what it was we were seeing in the trade in the first place.
As you can see the price had just “tested” the area right at its previous low of the day and appeared to be rebounding from that level. That was the theory when we entered the trades anyway. And it was a pretty solid theory. Although both of these contracts ended up finishing OTM, we really can’t say that there were any mistakes involved, or anything to learn from. It was just a matter of bad luck in the short-term fluctuations, with price dropping below both entry levels in literally the very last-minute of the trade. Luck goes both ways though. You’ll have your share of good luck and bad. But in the long-run, it will all basically even out, leaving skill to make the difference. To sum these trades up we invested a total of $119.80, and received $11.98 in returns. A loss of $107.82.
Next up, our oil trade. This trade was made after just randomly looking through some charts until we found one which looked like a high probability trade. Usually we start with a fundamental and technical analysis of the major indices, and then once we have an investment thesis we look for assets which might fit into that thesis well. That is the broad strategy which has made us consistently profitable binary option traders and we only rarely deviate from it by much. This trade was one such case, however. We felt fairly strongly that price would not easily break below that nice, even $100 price level. We were hoping it would go a bit lower though so that we could enter as close to that 100 level as possible to reduce our risk. But once we saw signs that it was done declining we quit waiting and jumped in with both feet, investing $212 on the trade.
It was a pretty wild ride throughout the duration of the trade. Not terribly surprising given its proximity to that important technical level of $100. Though we were obviously hoping for a more decisive rise. It fluctuated back and forth around our entry price the entire time, barely finishing OTM in the end. Our entry price was 100.425 and it expired at 100.405. Barely a tick below the ITM level. This trade was offering a 10% refund rate so we received $21.20 back from our $212 investment. Things are looking pretty rough at this point in the day.
And now we come to our first and only winner of the day. The NASDAQ composite index has always (well, not always) treated us pretty good and is one of our more favored trading assets. We were going to avoid any indices trading today because markets were going up and our thesis is a bearish one. We don’t like to trade against ourselves if it can be avoided. Today, however, was not an average day by any measure and sometimes you just have to step out of your comfort zone to stay in the game. We invested $121 on this trade, entered at 18:33 with a 19:00 expiry and a return rate of 70%. So, our ITM finish resulted in $205.70 returned, for a profit of $84.70 on the trade. Which doesn’t put much of a dent in our previous losses, unfortunately.
And that brings us to our last trade for the day. Yet another big fat loser, ha. Once again this was a trade that looked good going in, continued to look good for most of the trade, and then turned against us at the very last-minute. It just wasn’t our day. Which brings us to the fact that you should walk away when things are going against you like this and come back another day. We did not walk away and that was our one mistake. A costly mistake. Anyway, this USD/CAD trade was made with an investment of $105 and gave us a 10% refund rate for $10.50 returned. And now it is time to add up all the damage for the day and see where we stand.
For our five trades combined we made total investments of $557.80. As you know, four were losses and only one was a winner. With that being the case our total returns for the combined trades was a measly $249.38, a loss of $308.42, or a 55.3% loss of investment. A downright bad day no matter how you look at things. In fact this one day of losses wiped out basically all of last week’s profits. Of course we are still up decently for the month but this loss will make us more cautious in our investments for the rest of this week. So until next time, trade smart and be lucky!