I don’t normally write about trades that don’t make or lose money, but I felt that a large trade of FAS today deserved a special blog post.

I came into the day wanting to risk some hard earned monthly profits.  At the beginning of the week, Barney “FRE or FNM forever” Franks said FinReg resolution would be completed by end of day thursday.  I told myself based on market weakness during the week, that if FAS were to open down on thursday, I wanted to go large into this decision thinking that any resolution would be positive for the financial sector.  This remains to be seen.  So at the start of the day I opened up a starter long position in the name on a gap down.

Throughout the morning, the market remained weak, so I continued to scale into FAS, for a full “all in” account position at 21.70, with a stop at 20.99, risking a almost 4k of capital.  Even though the market conditions were telling me this was a stupid play, nothing was signaling buy to me except information I had earlier in the week.  These type of A + B = C trades can equal big dollars but most are losers.  Keep in mind, I earned the right to play FAS big here because I was risking small portion of profits earned during the month.

In the afternoon the rally started to come, and I was up a few thousand on my long position after being down most of the day.  I was going for the home run, hoping the market would turn and this would be a big trade and call.  However, at this point I moved my stop up to entry for a breakeven trade, even though I did not want to do this believing strongly in my position.

Turns out, FAS did not break it’s opening days high and melted down from there.  I HONORED my entry stop, stopped out flat, and felt deflated, on such a bold idea gone nowhere.  I even considered buying more on the pullback, but this late in the day I listened to the market action and the market fell apart into the close.  Swallowing my pride and HONORING stops saved me a few thousand.

Sure, I played this like shit.  Sure, others made money on the play.  Sure, I can second guess this trade until the cow come home.  However, even though this trade made me nothing, the technique applied and thought process above saved me money, and it’s this thought process of HONORING stops that I believe is the lesson learned today.

Now only if I lived in the twitter world, where I can say I got in at 21.10 and sold at 22.28 for a huge gain.  That would be sweet, but that would be bullshit in almost every case.  Learn from the above thought process, not some fantasy land.

JW