I thought I would quickly pen down my thoughts on this topic since it is essentially a large part of my trading/investment strategy, and it is one that is hardly talked about by those fly-by-night trader teachers. Of course there are many reputable "teachers/gurus" out there that teaches you to have a proper trading strategy, but I think people prefer to hear it from a novice trader sometimes.
I don't know about you, but I tend to prefer to hear it from retail investors and their first hand experiences and emotional turmoil that they have to go through whenever they are out there in the market trading for themselves. I have always wished for some kind of emotional social support group that can offer good advice in times of need.
When I saw that the SPY dipped at closing this morning, it affected me emotionally. I know this is a bad sign, because I shouldn't be feeling that way, but I guess I do. I know what I should do in this event, and that is to monitor the SPY tonight and then cut loss once it triggers my cut loss criterion. My writing of this note is to also remind me that I should be aware that these are the measures that I should take tonight should the SPY continue to dip and trigger my cut loss criterion.
I have decided to make my cut loss mechanism to 3 times of premium sold. The reason why I am doing this is because I don't want to waste time eye-baling the market again tonight. Also, I am assuming that if the SPY were to go down tonight, I will lose less since I will be cutting losses earlier.
The SPY futures looks like they are retreating to positive territory. I hope I am right! :)
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