ForexSpirit

I am finally all square. What remains of my trading account is not a pretty sight.

The horsehair snapped. The sword fell.

Going into this week the fate of my account was in the hands of the market. This is a really terrible position to be in and not one that I thought I would ever be facing.

Nasty drawdowns of 20%, 30% or even 40%? Sure, I’d imagined them and was prepared to face them. I’d even managed to work my way through a couple of them.

The situation over the past few days has not been one that I’d planned for or even envisioned. I don’t think anyone does.

At the start of the week my unrealised drawdown was sitting at around the 75% level. Eek!

The markets ticked up slightly during the first Asian session of the week. It didn’t last long and London took EUR-USD and AUD-USD to new lows. The market was continuing to go against me.

Monday morning I closed out two of my four most damaging positions, one from EUR-USD, the other in AUD-USD. This resulted in an immediate realised loss of 20% from my start of month trading account position. In reality it was more like a 30% drop as I had already booked some profits for the month.

It was then back into a wait and see mode to see if there was any chance of redemption.

The rest of Monday and into Tuesday the markets became pretty tightly rangebound. The EUR-USD hemmed in between 1.4340 and 1.4420. AUD-USD in the range 0.8560 to 0.8640.

On Monday I placed new limit orders at 0.4422 and 0.8622 to try and catch any breakout that might occur to the topside. These levels were a good bit above where price was meandering at the time. Both limit orders were executed on Tuesday as new upper bounds of the congestion area were tested. Unfortunately there was no follow through and there doesn’t look likely to be any just yet.

I placed stop loss orders for all my positions at 0.4350 in EUR-USD and at 0.8560 in AUD-USD. I was basically in a position where if there was a break to the upside I could look to at least recover the initial trading capital that I had placed in my forex.com account in August (which was substantially more than what I had been previously trading with).

If price went south then it wasn’t going to be a happy ending.

Today the market rendered its verdict. My luck was not in.

My stops in EUR-USD got hit on a run through the 1.4350 level. AUD-USD looked to be following suit so I actually manually closed out all positions about 15 pips above my placed stop loss level. It would have been hit anyway if I hadn’t done so. I had a few other small entries open on these pairs which I had initiated at various points on the dollar surge late last week. They were dwarfed by the main positions that I had opened higher up that were the main source of my pain. All these smaller trades were closed out as well.

It was always going to be a crap shoot whether the euro or Aussie dollar were going to see any recovery this week. The low volume and increased volatility this week in the run-up to the Xmas holidays meant that just about anything was possible.

In more normal market conditions I would say that the narrow price range forming after such a steep drop is creating a nice area of support. This in turn would point to a slightly higher probability to at least some sign of dollar weakness, even if it was short-lived. Of course, these aren’t normal market conditions so those probabilities go out the window to be replaced by wishful thinking.

With the dust settled and the blood flowing freely my account has been decimated by 79%.

While that figure stings, the one that probably hurts the most is that only 42% of my original trading capital remains.

I might be down but I am not out.

I’m going to take a break from actively trading for the next few weeks, just like I had intended to.

During that time in moments of reflection I’m going to mull over what changes are required to my trading plan.

I’ll implement those changes and be back to face the markets again some time in the new year. I have put too much time and energy into trading to give up now. I have the focus and drive to make this work and be successful at it.

If nothing else I hope my experience highlights the vital importance of having disaster stops in place at all times!

This week has been a harsh learning experience on my trading journey. I hope that it aids me in becoming a better trader in future.

I am disheartened in that I have nothing tangible to show for the hard work and success that I had for the vast majority of the year. But that is the cruel reality of blowing up. On the flip side, I find some slim slivers of solace in the fact that a great many trading giants have gone through this same experience. It is not the end of the road by any means. I just need to dust myself off, learn from my mistakes, take the lessons to heart and get back out there trading again.

The mariner’s bound to tell of his story.
To tell this tale wherever he goes
To teach God’s word by his own example
That we must love all things that God made.
And the wedding guest’s a sad and wiser man.
- Rime Of The Ancient Mariner, Iron Maiden

Like the wedding guest enraptured by the Mariner’s tale, I hope my tale leaves you a wiser trader.