ForexSpirit

There are two types of big losing days I can experience. The first is where the market trends from the open in the complete opposite direction to my chosen bias. There is likely to be no retrace and no matter how I choose my entries I am not going to make any profit. The only thing I can try and improve on in this case is to determine how I messed up my analysis phase so that I don’t pick a bad bias in future. There is nothing to be learnt about trade management.

The other type is where I have a series of mistakes that culminate in a bad day at the office. Today was such a day. I was impatient, I missed some obvious market plays, I was greedy. The saving grace is that days like today provide a ton of lessons that I can learn and improve on.

In the hours since I finished trading I’ve been caught in a duality of feelings. On the one hand I’m frustrated and angry at myself for being such a bonehead. Some of the mistakes I made today I know about and are thus ones that should not have occurred. On the flip side, I’m grateful that it wasn’t a complete waste of capital: some new insights were made that I can hopefully build on going forward.

The market had been in a pretty tight range since the week’s opening, ranging between 1.4330-70. With the general bearish tone in the euro over the past week I decided to see if I could play it short within the range.

Bias: short
Conviction: medium

So my first mistake was going with medium conviction on this short bias. Over the past couple of weeks when I’ve found price starting off within a range like this I’ve been able to have both the top and bottom of the range AND the middle act as S/R. Generally price will stick to one half of the range during the quiet 6:00 EDT hour and so the middle of the range is important. Today I forgot about that.

Instead of seeing how price would react to 1.4350 (the middle of the range) first, I went in with an early short. This entry highlights another weakness that has been creeping into my trading lately. If I feel that price is going to be moving slowly, I see to want to just enter a position anyway, thinking that I can always bail it out later with some averaging down. This is a lazy approach to take which came home to roost today.

After my first entry was made price attempted to pierce the centre of the range but bounced quickly back to the top half. This should have been a clear sign that it would be better to play longs off the 1.4350 for now (and look to quickly switch to a short bias if 1.4350 broke).

Instead I was committed to short. The second leg entry was not much better placed or thought out than the first one. Okay, it was coming back down from a high, but was not really backed up by anything else.

The third leg was the first decent entry of the day and should have been my first. 1.4365 had been decent resistance in the prior couple of hours. Taking a short on a bounce down from the level was warranted. Price came back down and was bobbing just below my BE level of 1.4356. I was trying to hold on for a 5 pip TP level at 1.4349.

A small range developed from 6:35 EDT onwards for just over 10 minutes. Then came my biggest mistake of the day. There was a false breakout to the south of this small range. When the break failed I should have at least moved my SL up to BE, but I did not. In fact I should have probably just exited the position I held (for a pip or two) and gone long. This should have been the second trade I made today.

After having missed my opportunity to exit my three legged sequence I just held on in hope that price would come back down and allow me to redeem myself. It was not to be. Instead price went back up to the top of the range at 1.4365 and started to hug that resistance line. A contracting triangle was forming and I knew if it broke that I was toast.

At 7:00 EDT there was a third touch of 1.4365. I’m fond of price touching a S/R level three times and then retreating. On the third touch I played my last card with a fourth entry.

The resistance at 1.4365 gave way and steamed towards my SL levels just above 1.4375. If I wasn’t so heavily geared and now crestfallen that I’d let unrealized profit turn into a realised loss I might have considered doing a SAR. The earlier high of 1.4370 for the day had been easily breached and a push up the width of the range was pretty likely (thus a move up to somewhere close to 1.4400).

Just to iterate to myself the lessons learnt today:

• Be more patient if price starts in no man’s land (e.g. in the middle of a range).
• The middle of the range is worth using as S/R.
• Don’t let a highly geared position (15+:1) turn into a loser if you’ve seen at least a few pips profit. BE is fine.
• Don’t be blinded to strong signals that are counter to the direction of the position in play.
• Pay more attention to the optical illusion that is price: being able to see reasons for being long and short at the same time.
• High or lows for the day that were created on a single push (or spike) are prime candidates for being tested again and will often break easily.

With all that off my chest now I feel better.