Tag Archives: losses

Searching for the silver lining

This post is somewhat unusual in that it actually contains a chart – whump! (sound of reader falling off chair) and describes a failed trade. That last bit isn’t (currently) so unusual ūüėČ

The silver lining is related to the ‘recovery’ or indeed what’s known as the art of getting out… but before we go there I’ll cover why I thought getting in was a good idea…

Essentially I ‘felt’ that we’d got to the bottom for the euro ahead of the US open and that we should see the cavalry appear to buy back the lows. I didn’t believe there would be a whole heap more selling interest last thing on a Friday…

This was sort of propped up by the super amount of chatter along the lines of ‘OMFG the Euro is going to TANK!!’ which generally gets on my nerves…

It probably didn’t help that I was looking at this on my phone while sitting in a coffee shop. This is never a good idea. At the time I also believed that there would be a short sell off then a recovery – which meant I at least placed my initial stop a thousand light years from my entry.

Now in retrospect what I failed to check when attempting to pull this sort of stunt was the ATR for previous days. We’d moved about 100 points and the previous few daily ATR’s was about 120 so at the very least I was getting in significantly early…

So I got filled at 1.21790 and had to leave what I was doing, move about and get back to work… The next point I have an opportunity to see what’s going on I have one of these moments…

Anyway I’m now pretty much looking to get out of this because the original ‘thesis’ for my trade is very wrong. The¬†only saving grace here is that what I originally believed would happen will still happen it’s just this is going to take me out at/around me entry point rather than at +30 which is what I had originally been looking for

So I’m now ‘happy’ cause while I made a rookie mistake (not checking what the ATR actually was before going into this) I’ve enough experience to ‘know’ that rather than throwing all my toys out of the pram and puke for -20 price should grind back to at/near my entry and I can get out pretty close to even.

There’s a point later where I could have got out exactly flat but I wanted to exit before people started fading the london close and didn’t want to grind out another hour with a potential 30 point loss ‘at risk’ if the market decided to take another leg down. What’s the benefit of risking losing 30 to gain another 5 points on my exit? There isn’t one and I obviously can’t see into the future. If anything this post proves that. LOL

Now there’s all sorts of things I could have done to improve the outcome like adding at 1.2150 but I’m trying to manage this through my phone and generally stick to my (new and on the fly) exit strategy. Adding to losers isn’t on the list of ‘new and wacky things¬†to try‘ especially not on a Friday afternoon when I’ve not done it before.

Or I could have had a stop under 1.2175 but I wasn’t really prepared to do that ’cause I was a little close to the US open bell.

Or I could have closed my trade then got short at 1.21800 but really, by this time I was a bit fried mentally. Worth considering for another time though… Maybe not last thing on a Friday however.

So there you go. I made a mistake, it didn’t kill me, I learned a lot and maybe some of you learned something too (e.g. time of day is important)

While it was a ‘failure’ from a results perspective from an ’emotional management’ perspective there was a marked improvement from previous encounters like this.

p.s. Thanks to everyone for the ridiculous number of views (2000+) related to the previous post which was completely staggering. Your support and interest is essentially what is currently keeping me moving forwards – seriously.

I’m also considering changing the theme/format of this blog but if I go there it’ll be in a couple of weeks time. People don’t seem to like change so I’ll only do this if/when I can find something really sweet/zen looking etc.

Interesting lessons from Thurs/Friday

My results overall this week were rescued by me being short EUR/CHF on Friday at the point that US non-farm payrolls came out in the USA and the subsequent 60 point fall essentially saved my arse. Prior to that I’d again made a couple of ridiculous trading decisions like entering the Dow long before it opened – this seems to be a recurring mistake of mine. Having blogged this mistake three times now I’m really hoping to not repeat it anytime soon! Note to self… Do not enter indices bets while they’re not actually open!!

So yes, mistake number one – entering the Dow long at about 7am in the mistaken belief that I had suddenly gained godlike powers, well enough powers to influence the world opinion about the US economy. I did (I think) have the opportunity to close this slightly up before the inevitable slap for my incurable arrogance happened but I got distracted and got stopped out at -45 points of so…

Also made similar mistakes with Silver early on – have committed to stay out of this lunacy for the time being and this was rounded off by an attempt to recover my losses by going long GBP/USD in the afternoon…

So somewhere in the horizontal line I went long – this is on a 15 minute chart and the grey section is the part which came later… Now, with amazing hindsight powers, it’s clear this trade was a total punt.

  1. I’m right in the middle between support at 16,306 and resistance at 16,418 so there’s no way I should be even considering this trade.
  2. There’s no confirmation or entry signal whatsoever.

So, all things considered I take full responsibility for not managing my emotional state (trying to recover losses from previous dumbass decision) and taking this trade in the vain hope it’ll go my way. Doh!

Now, it’s an important point that previously (i.e. in the preceeding weeks) I’ve lost and then walked away from the markets in some sort of hissy fit to recover and essentially steel myself for another stab at trading. In the process of 2-3 days absence I’ll have missed some blinding opportunities and only serve to get pissed off at myself further in the process. Nice!

So with some trepidation I resolved on the following day (Friday) to keep an eye on what was happening. Looking at EUR/CHF I could see the worlds longest multi-day down trend as well as the price attempting to rally back to the trend line. Time to go short!

From the chart this still isn’t the best trade setup as I’m still somewhere between the blue and red horizontal lines ūüėČ but at least my entry (first horizontal line) short came off a previous lower low, the stop wasn’t too far away and I stayed in because it didn’t really have a lot of strength bouncing off support – not enough to take out my stop anyway. Then, as the NFP data came out, BANG!

I was suddenly 50 points ahead and moved my stop down to capture most of this. It could have kept going but I was happy and eventually got taken out by the reversal. (everything in dark grey happened after I was out of the position)

All in all I didn’t manage my exit too badly I think.

Now, this led me to look around at other instruments in the following hours and this is something I’ll be keeping a close eye on this time next month…

For the FTSE100, GBP/USD, Dow and EUR/USD there was a proper setup with a confirmation on the hourly bars following the news release.

So, ¬†with any sudden drop if the daily chart is trending up¬†and if there’s a reversal which is confirmed by an hourly bar (in the chart it’s got a low test before I’ve marked an entry point) then I’d suggest this is a pretty good and low risk trade.

Pity I missed 4 of them but hey, at least I’ll know for next time ūüėČ

Beneficial learning experience… ARGH!

The following article may contain slightly too much self recrimination…

It’s worth knowing a little bit of background prior to Thursday to fully appreciate the lessons learnt which I’ll get to following quite a large amount of self-criticism ūüėČ

Ok, so met up with a friend of mine and we discussed a number of trading related ideas on Wednesday evening – to be honest he’s managed to do extremely well and I picked up a couple of ideas… So, keen to implement said ‘new ideas’ as soon as possible – mainly around exit strategies about which I have little clue.

So I wake up minty fresh and full of enthusiasm Thursday morning and immediately make a number of random, un-forced errors… Of which there will be >5 during the next 5hr period… Joy! ;(

Trade number 1

Before opening¬†I place a FTSE long trade. There’s significant mistake number one right there. This is essentially a total punt. Who the F¬£$k knows what way the market will go in the first 15 minutes on open?

Broken rule number 1: Do not place orders to open before the market direction is clear.

Trade number 2

Immediately place another long trade when the market retraces back to open. What I’d blatantly failed to do here is pay attention to the trend for the last 4 days. DOWN… What direction has the market been moving in? Repeat after me… DOWN. Don’t even remember considering shorts so completely don’t recognise this obvious play. Stopped out again.

Broken rule number 2: Not having the flexibility of mind to consider the potential for the trade to go the other way from what I’m foolishly looking for…

Trade number 3

Enter long on HTG by correctly observing rule number 1, however this is not really following a ‘plan’ as such just my belief that ‘it’s fallen far enough already’ when there’s no significant signal that the general down trend has ended. Bashes straight through support and keeps dropping during Friday.

Broken rule number 3: No entry signal

Trade number 4

Actually I’m happy about this trade (EURUSD I think) which bounced off support – I went long and got up to +30 points. I moved my stop to just above entry and I’m now patiently waiting for a +70/80 point move to make another stop move and lock in some profit… In point of fact this was just ahead of the point where the whole market tanked so I was actually quite fortunate here. I’m happy with my execution of this trade as it did use the exit strategy I’d discussed with my mate but I essentially got stopped out.

Trade number 5

Similar to the one above EURGBP I think. Again made it to +20 or so points. If I’d have managed to get the platform to behave properly I should have closed all these off for a neutral exit. Happy with this one too. Can’t blame anything/anyone else for the following.

So essentially, errors in trades 1-3 and my failure to close out 4/5 in profit meant I’m now 3% down and frankly I’m pissed off with the whole thing… Here my tail of woe really begins.

Over the last few weeks I’ve also been looking at Daily Light Crude US which has¬†awesome potential¬†for huge gains… If you can trade it right… and I basically jump in¬†twice¬†trying to call the bottom of a falling market. (Yes, totally moronic) In the process loosing ¬£30-¬£50 per hit because even with ¬£2K account this is not even¬†close¬†to be able to handling the stop loss requirements for something where a 100 point movement in 15 minutes is just noise… Erk!

What’s more I’m trying to call the bottom of an 8%+ fall when the entire commodities sector is completely losing the plot. Just as something can keep rising like a rocket it can also keep falling like as brick…

The biggest issue here though is that I broke¬†Golden¬†Rule number 4:¬†DO NOT chase your losses in an emotional state of mind.¬†Trades¬†6/7¬†cost me another -4% approx…

Main reason for this last error is thinking of the potential gains with absolutely no real considerations about the potential risks. Of course what I should have done is completely take it on the chin, relax and re-group before taking an objective look at what was happening.

So at this point I’m essentially at work in a terrible state of mind – nice!

However, with every cloud comes a silver lining… or learning – lol

1. I did execute two trades very well in markets that later dropped through the floor
2. I’ve been able to recognise the mistakes I made (detailed above)
3. This will lead me to become a better trader
4. I am identifying that I need more self-discipline. Not just in trading but life in general which of course means a number of parts of my life should also improve as I work on this…
5. Need to consider the potential for a particular trade to go wrong as well as (optimistically) right. It’s foolish to assume all decisions you make will go your way!
6. I need to carefully consider whether it’s an entirely foolish idea to have trades open in short(ish) timeframes while I’m sitting at work behind my computer. IT can go wrong… this could be costly!
7. Re-iterates the fact that you¬†absolutely must trade to a plan¬†and for some light relief after all that recrimination I urge you to listen to the following as to why having a plan¬†and sticking to it¬†is so very important…

Just re-read this in December 2011 (6 months later) and am absolutely horrified! Who is this person?! PLEASE people. Don’t do this – get some proper training first! Start here if you’re looking at FX