Mistake Costs Me
November 15, 2006 by Trader Rich
I wanted to give a quick trading update since I haven't talked about it in a while. I've been quite the flip-flopper trading the H-system. I was going to give it up, then I decided to stick with it, then it was depriving me of sleep so I stopped again, but now I'm trading it again. One of the reasons I decided to start trading it again was because of the alerting capability that I discovered in Metatrader. I'm sure a lot of you were well aware of this functionality but for some reason, I just never explored it. Having the ability to set sound alerts will help immensely with this system. Alerts will still wake me up from a dead sleep but not during unnecessary times.
I set an entry last night that was triggered between 1:00 am EST and 1:30 am EST. This time period falls outside of the allowable times that the H-system rules state so the entry really was a mistake. From my observations, I just found that the GBP/USD is erratic during this time and therefore I don't trade during this time. This morning, I lost 90 pips because of this mistake but I was able to make it back on a discretionary trade of the GBP/USD that netted 103 pips. This brings me to money management. I entered this trade with 2 profit targets. The first profit target was hit without any intervention from me and the position closed. My second profit target wasn't hit but I decided to close the position out at around 7:45 am because of 3 reasons:
- Economic releases this morning and afternoon - I've always had a hard time trading longer term charts (this trade was generated from the daily chart) because I just am not patient enough to wait for my profit target to get hit. I worry that an economic announcement can wipe out any gains from this position.
- Fear - Like I stated in #1, I was worried about an economic announcement wiping out my gains.
- The previous trade - Since I lost 90 pips on my previous trade, I was content with taking profit because the gains make up for the loss.
I don't know if any of the 3 reasons above are valid reasons for exiting my position prematurely. My reward/risk going into the trade was 2:1 but by exiting it early, I really only got a reward/risk of slightly over 1:1.
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I don’t want to throw your words in your face but:
According to the money management article you referenced in this post yesterday “What Everybody Ought to Know About Money Management”. Yes the design of his site was 1 step up from Borat’s but it really drove home the point that if you play too conservative when you are up, you are just going to be spinning your wheels. The Lien & Schlossberg strategy is also setup around this principle it seems from the emails they send out. I think the biggest mistake though your psychology of trying to break even on this trade to make up for your previous screwup. Every article that you have posted essentially said this is the wrong mentality to enter or exit the trade. Let yesterday go. I thnk you have to place each trade in a vacuum and isolate yourself from thinking about yesterday or the day before.
Read your flowchart from yesterday:
1. Look for your entry.
2. Place your order.
3. If it goes against you and hits your stop, move on to the next trade.
4. If it reached your first profit level exit a portion of your trade and move your stop to breakeven.
5. If you reach your second objective Either close completely or ratchet up your Stop loss again and exit another portion of your trade.
Since you “Are Oanda” you know that you can exit any portion of a trade at any point, unfortunately we can’t use trailing stops.
I alsp have a totally different attitude on the news. Trade it technically, if your in a position esspecially if it is up, stick with it. As always be conservative with your Stop, yes you’re going to get some slippage if price moves against you but if things go your way it could be your biggest win of the year.