To start off the new year, I've found myself making the same mistakes that I promised myself I wouldn't make.  For one, I consistently violate the 2nd principle of Consistency which is "I predefine the risk of every trade."

I neglect to predefine the risk because I rush into a trade.  When I'm looking at the charts and switching between currency pairs, I find something that immediately catches my eye and within a minute, I've executed a trade.  Once the trade is executed, then I define the risk.  By this time, it's too late and sometimes I find that the risk was not worth the reward.  When the trade fails, I am in a state of denial and execute another trade in the same direction as the last except I'm bidding or asking at a price less attractive.  This is how I start chasing the trade. 

Nevertheless, my first trade of 2006 was well thought out and risk and reward predefined.  This trade profited 38 pips.  My second and third trades were bad trades in that the risk was not predefined.  Once I entered the trade, I set a tight stop and lost 32 pips total on the 2 trades.  This isn't bad but it essentially cancelled out my first trade and the second of these 2 trades really was an emotional attempt at recouping my gains from my first trade.  My fourth trade of the year was a USD/CHF short last night which I consider another good trade because my risk and reward were calculated and I followed through on my trading system.  This trade profited 137 pips.  I find that in successful trades like this, having multiple positions open would have greatly benefited this trade, not only because I would be up 3x but because I'd have more flexibility in allowing this position to ride longer on remaining positions. 

Either way, week 5 has me up 143 pips and $1050.  This is a good thing but my lack of discipline is troubling and must be worked on.

I'm a bit spooked right now until the FOMC minutes are released this afternoon.  Until then, I'll sit tight. 

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No. 1 :

i know that this may be an obvious (and therefore "no-brainer") question for u, but.. how do u define "risk" (and "reward")?? Are u talking about risk in terms of probabilities here? or only in terms of pips u are willing to risk?

And then how about profit? Pips? Signals?

Submitted by Jeff • 2006-01-05 14:44:10

No. 2 : Risk

Jeff;
go to alphatrends.blogspot.com and watch the videos, you will get the idea in no time.

Submitted by Forex Trader • 2008-01-06 17:53:29

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