The "pros and cons" of OCO orders. Sure enough, the market rebounded shortly after the closing order triggered on the December 1 credit spread.
Seeing the market rebound shortly after our December 1 position was closed for a loss prompted me to post this article on the pros and cons of having OCO orders in place at all times. I always manage my trades in this manner; for several reasons. First, it minimizes the amount of time I have to spend at my computer watching a position, and secondly it removes the emotional aspect when a position reaches my pre-set max loss.
Every trader is different, and some of you perhaps do not use OCO orders to manage your trades. Kudos to those of you who may not have had orders in place this morning; the rebound has put the position back in positive territory. However, am I sorry that I had my order in place? Not at all; I continue to have my trade plan, and trade the plan according to the guidelines. The market could just as easily continued the move down this morning, which would have resulted in a much greater loss.
As I have mentioned previously, it is faster to recover from a weekly trade than a monthly trade, so the occasional losses that are part of the business do not destroy results over the long term. I have summarized the results for 2013 for the weekly credit spreads:
# Weeks traded: 21
Average length of time in the trade: 4.3 days
Average margin per week: $910
Average gain per week: $28, or 3.0% gain on margin per week
This gain represents a 63% return on investment over the 21 week period.
After summarizing these results and accepting the loss, I will now move on and look forward to the next trade entry for the December 2 cycle. For those of you who may still be in this week's position; it is recommended to close before the end of the day today. There is too much economic news being released in the morning to carry the position overnight.
As always, stay keen on your risk management and trade carefully,