I was redeemed this week. Well, okay, my account was redeemed – I don’t know if my trading methodology was in any way redeemed.

I was reminded this week of one of those little bits of trading advice that I’d forgotten — take profits quickly in choppy markets, but let them run in trending ones. The market continued to be pretty choppy this week.

I got lucky, I think, which made it easy. I let dollar-based trailing stops handle my exits, and all three trades this week were winners. All three WOULD have been losers if I hadn’t been fortunate in my entries and iron-clad about my exits.

I entered Microsoft puts Monday morning, followed by PCP puts later in the afternoon. The MSFT puts I bracketed with a trailing loss and a target sale price – those did GREAT Tuesday morning. The PCP puts lost a lot of value later in the day, and eventually exited with a small profit on a trailing stop with Wednesday morning’s SERIOUS choppiness. By that point I’d exceeded my goal, but I got gutsy and got back in on Wednesday with puts on DIA (Diamonds – a DOW Index ETF). The market took a major swan-dive Thursday morning, but recovered almost fully by close. My trailing stops saved the day, as I was off getting a sandwich for lunch when my order fired on a massive upwards surge.

I couldn’t read the market very well at that point, and so I decided to take my profits and call it a week. Friday was choppy and ended much where it started.

All-in-all, this was my most profitable week this year under my current weekly goals.  I exceeded my goal by about 4x, and was correct 3 out of 3 trades (well, technically I guess it was four, as I entered my DIA puts at two different times on Wednesday).

I broke Livermore’s rule about not increasing my stake in a position until it posts a profit – my second DIA entry was cheaper than my first, as my first position had lost value.  However, by the end of the day it had stayed well within my window, rising closer to my resistance line but incapable of pushing higher, showing greater weakness in the last hour. It was probably not the best entry criteria in the world, but it does suggest that there may be an exception in there somewhere to Livermore’s rule. I entered when I did because I was afraid of missing the move and thinking I couldn’t GET the entry I had wanted. By the end of the day, I had the entry I wanted, and it had done nothing to violate my reasons for wanting to get into the position.

The combined positions did not violate my dollar-value limits on position size (well, I take it back – they violated it by $3, shame on me), it was a highly liquid option, and as my second entry was near EOD I wasn’t worried about getting a double-ding against me on the day-trading rules for having to exit the same day.

So it worked out, but I played a little loosely with my rules on the DIA positions.  It did pay off this time, but I should either officially modify my rules a bit or adhere to my old ones a little more tightly.

But I made up for all of my losses last week and then some. So that, at least, makes me feel good.