It's 14:25 and I can feel the nerves. I know this is just trading and is essentially the same as it is any other day, but this is not just any other day. This is CPI release day and I can feel the anticipation building nervously within me.
So if you read my other post you'll know that I have a strategy I was going to employ in order to trade. It involves me entering the markets in the final minute (14:29 - 14:30) with a trade each way (hedging) so that I am 'in' before the announcement as I know from experience how quickly price can move once it hits 14:30 and it is virtually impossible to catch the move. This involves a 'sacrifice' of a certain amount of points as a market cannot move simultaneously in both directions, so one will be a loser and one will be a winner. The logic is that the move will be so great that it will result in a gain many times that of the sacrificed points, so it is a small price to pay.
So the final minute is here. Let's get these trades on. I intend to place them in both the DAX and the NASDAQ so four trades in all. DAX first. Click, buy. Nothing. What? Click, still nothing. What is happening? I'm clicking 'buy' but it is not executing the trade. The price is moving too quickly, although only within a small range. Shit! I've only got 30 seconds to go until 14:30 so it doesn't look like I'm going to be able to trade both markets. DAX it is then. Click. Finally! I'm in and I select my stop of 40 points. Right, now to get in the other way. Remember to click 'hedge'. Done. Another 40 point stop and we are ready with only 12 seconds left to go. I feel a little bit sick I'll be honest. 5...4...3...2...1...bang! It opens so quickly. Wait WTF! Why are both trades still open! One is showing +£50 in profit and the other is -£45! Close. Close damn you. Why won't it close? Click, nothing. Click, still nothing. What happened to my stop? It should've closed the trade with a max £20 (40 point) loss. What's going on? Close. Close. Finally it's closed but at minus £44.45 (89 points!). At least the other trade is still going strong. Okay it's starting to slow down a bit, the initial rush is over. It's beginning to pull back now. Do I hold or close? What's the profit at? +£99 (that's basically 200 points). I'm done. That's it close the trade. Click, we're out. Phew!
That was a little insight into my thinking and my self talk whilst I was trading. All of the above took place within a 42 second window. It took 8 seconds to close the first trade, (felt like a lot longer!) and I closed the second one after 42 seconds. Wow! What a roller coaster that was! My heart is properly beating. So what did I make? As I look at my trade history through squinted eyes I can see that I closed the second trade at +£97.05 so minus £44.45 I walked away with £52.60 (105 points). Not bad. Not bad at all for a noob with a less than perfect plan. I'll take that. But what the hell happened with that first trade because realistically I should've had another £24.45 (49 points) as my stop was set for 40 points (£20).
I was confused for a little while for sure but then I realised what had happened. Quite simply the price was moving so quickly that in the time it took me to click 'sell', the electronic signal to pass from the keyboard to the computer then across the wifi, across the world to be received by the broker whose own computer then executes the command to sell, the price had changed. So why then had my stop not been triggered sooner? Same thing. The price had moved so damn quickly that the brokers computer simply couldn't get the price I wanted and so couldn't 'close' the trade until the volatility had settled sufficiently that the command could be executed. Bugger! I can see why those who choose not to use a stop when they trade can loose significant sums, if not blow up an account if the same thing happens when their chosen instrument moves quickly.
It was then that it dawned on me. What a fool! I could've had a guaranteed stop!
'A guaranteed stop-loss order (GSLO) is a type of order that ensures your position is closed out at the price you specify, regardless of market volatility, slippage or gapping.'
Looking at the TD365 ticket there is a tiny little check box which shows exactly how much it costs to employ a guaranteed stop. In my case, 3 points or £1.50. So for £1.50 I could've had for the sake of easier math, 86 more points (£43) in profit. The sad thing is I knew about guaranteed stops, but for some reason it never even crossed my mind to use one even though I knew how volatile the CPI releases are from my previous price research. Now THAT is a true noob mistake. Oh well.
Let's look at what happened, objectively.
Did my strategy work? Yes. Did I make money? Yes. Was it a great experience? Yes. Did I learn from it? Oh yes. What did I learn?
Primarily I learnt that when trading something this volatile using a sacrifice strategy, always use a guaranteed stop loss. It could've made me almost double the amount of points that I actually did make.
Also, when price is so volatile particularly around announcements it may not be possible to trade multiple markets so focus on one only and ensure my entries and stops are as good as they can be.
No matter what is happening remain calm and accepting of all outcomes. Whatever happens, happens.
So there you have it. My first proper trading of a CPI announcement. It was exciting, scary, interesting, nervy and an overall great experience and one that I am looking forward to repeating. There are CPI announcements all throughout 2023 (once a month) and you can rest assured that I will be trading all of them, using the same strategy, only from now on it will be with the addition of a guaranteed stop loss.
The hardest part will be coming up with an original excuse for work as to why I am 30 minutes late again...
Comments