Pair trade gone wrong

F&O
1

Just wanted to vent :frowning:

I traded TCS/LTIM recently short TCS and bought LTIM, I assumed LTIM would bounce back and covered TCS shorts prematurely on Thursday now I have B: 1050 qty LTIM mar fut @4938.14. I sold 4900ce 197 covered @151.44 sold 4800ce at 190 my cost basis would be 4703.

My plan was to trade with 1 lot but it went out of control. I do have cash to take delivery lucky my instincts didn’t let me exceed my capital. I could close the trade and take a loss too.

My lessons check the liquidity of fut they suck
Plan gone wild
Don’t trade in stress
Stick to 1 lot
My ego is bigger than loss

Now I have to dig my heals and do covered calls to recover as much as I can and stuck with stock (I prefer TCS wouldn’t be worried if it’s TCS)
I don’t think it’s a bad stock may be few years sticking with it will teach me lesson

I gave advice on position size many times here and **** it meself.

Ps: I have client visit and on-site manger sc****** me.

I don’t think i am horrible trader

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2

I dont know how things will evolve, but converting a trade into long term investment seems like a classic mistake. Maybe it will work out, but why not take the loss and call it a day to avoid larger risk ?

Good luck.

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3

Thanks mate. I was contemplating since morning on the edge to realise loss just needed a push like this …anyway my max loss threshold is 2L. I took loss like a champion :slight_smile:

When not sure exit!

2.3L in hole but worth the lesson, my biggest thus far.

Thanks again!

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4

Now dont blame me if it bounces :slight_smile:

Anyway, loss aversion is something we need to get rid of as traders. And stick to plan, and test that plan first. Good luck.

Ed Seykota - “If you can’t take a small loss, sooner or later you will take the mother of all losses,”

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5

Lol. I thought I came up with that and wrote that in my journal a few years back:

1.13.If you can’t bear that loss, you’ll have to bear much more loss. Be QUICK to exit.

6

He he he … I will blame you! Jk! Bounce or not I usually make peace with my decisions. I am sure to blame for position sizing.
I read innumerable times position sizing and sticking to SL. I preached my mates on it now it got better of me.
I got a screenshot of it! I am sure I will make bigger mistakes but for now keep my head down and stick to size.

PS:I recently moved 75% of my trading account to managed services to free up time and effort. Would have been colossal mistake if i had full account with me and gone crazy.
I had to toil about 4 months to get back to even with savings.
Thanks again!

7

Would love to see all the other points

8

Its good to realize your mistake early before big damage to account. Be Humble even when market goes in your favour, else market teaches lesson brutally.

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9

I’m net negative because of silver this year, but still positive on NIFTY. I mainly do positional options usually on NIFTY. Some selected ones:

  • Dont catch the falling knife/Dont short a rising rocket
  • Dont trade on smaller interval chart
  • Can you handle being cheated by FIIs and not respond back? if you can, you won half the game
  • Mandatory 1 hour gap after 1 intraday loss. End of day off after ___(a big amount) loss and Tomorrow off after ___(a big amount) loss - even if tomorrow makes a high ranged move, you’ll be making loss -trust me!!!
  • You don’t have to take less probability trades or any trade at all. Take only high probability trades
  • Don’t average
  • Mind the delta!! Your highest losses are due to doubling the position sizes. You can’t handle negative delta. Corollary: During sudden moves against your position, better to exit early than later. Even if it reverses, the negative delta would hit your stops
  • Gap? Usually it’ll reverse. But if it doesn’t, it may keep going in the same direction. Exit at second/third 3m candle.
  • Do not repeat the same strategy after loss. If you were neutral before, don’t take another neutral trade after loss.
  • Just because it’s so far doesn’t mean it won’t come close to it today. Markets can be irrational.
  • You’re reading this, because you forgot all the lessons. So, do it like you mean it

Today’s gap is an excellent demonstration of my gap rule. All these insights are paid by my hard earned cash and pain. I still break most of the rules, but I managed to stop almost all revenge trades completely(point 3 and 4). That alone put me in profit with nifty for a few years… nothing decent though. It’s not really about following rules, it’s really about managing emotions.

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10

IMO if you have backtested profitable strategy in long term then follow it without emotions considering the MAX DRAWDOWN in advance. Don’t abandon strategy just because of few loss making trades. DISCIPLINE in strategy execution will make you Profitable.

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11

Obviously my rules work only for me. In this case, repeating the strategy(without sufficient gap) is just a form of “revenge trading” to me. Someone like Jason or Neha play regularly with falling knifes and they have the capital to catch it and even get cut. Someone like @SpacemanSpiff use I believe, a automated strategy involving intraday share, which allow drawdowns for months. That is not suitable for me or my mind. If I can reduce drawdowns - both the depth and the time, but make less profit, I’d do that. Everyone’s strategy is different and constantly evolving to adapt to the circumstances.

12

One thing that has stuck with me from watching long term traders on YT goes something like this:

if it was put on as a spread it should come off as a spread

In this case that would be the two legs of the pair trade, but I think it applies. :dna:
If your thesis for the pair trade did not pan out both the positions should’ve come off together. :two_women_holding_hands:
The risk profile for a naked long LTIM trade is drastically different from a partially hedged pair trade. :face_holding_back_tears:

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