ForexSpirit

Where to start?

I made two Mistakes today. Big ones and deserving of the capital M that Joe DiNapoli likes to use to highlight major issues that should just not be happening.

The first Mistake is something that I’ve been mentioning far too often over the past couple of weeks: being impatient and jumping in before I’m fully settled in. This was a problem that I identified very early on when I started scalping again in February. To combat it I decided to not enter any trades within the first five minutes. This was to give me a few minutes to immerse myself in the market and make sure that I was comfortable with my analysis.

Maybe it’s just my increasingly confidence, or getting comfortable with this style of trading, but I’ve been getting sloppy in following this rule. It’s been one of the root causes of all my losing days this week and has been a prime contributor on days that I’ve struggled but come out ahead.

I can’t let it continue or it will torpedo everything I’ve worked hard to achieve so far. This is a Mistake that I can work on by having a change in habit.

When I open up my trading platform one of the first things I do is to enable one-click trading, which is all but essential for being able to scalp. Going forward I will refrain from enabling one-click trading until after the first five minutes of the trading session have elapsed. If I do impulsively jump into a trade before I’ve enabled one-click trading then the confirmation dialog box that appears will hopefully be enough to have me cool my heels and reconsider if I’m doing the correct thing.

The second Mistake today was not downing tools when my uncle point was reached. This is the first time this has occurred and I’m still not 100% sure why I decided to just double down. I fear it may be as simple as one of the traditional trader weaknesses: not being able to accept a loss. In my case, it might more appropriately be not being able to accept a string of losses. When the first trade sequence was taken out at the disaster SL it was my third big loss this week. I did not handle it well and jumped impulsively into a trade without any planning or forethought.

I’m just glad that the rash trade sequence did not pan out. If it had I would have been rewarding terrible behaviour. Instead I got the punishment I was due for doing something so rash and stupid. It will take a long time to come back from the losses I suffered today and earlier in the week. That’s only fitting.

There’s nothing I can do differently in my daily trading routine to mitigate against the fatal doubling down I did. I just have to hope that the searing disappointment I feel with myself is enough to make its mark long into the future.

Today is going to live in my memory for quite a while. I had to do numerous deep breathing sessions over the course of the morning to try and calm myself down. I felt in a state of minor shock as I ate my breakfast.

I don’t care that I’m just trading a demo account. I’ve traded a live account before. I can get just as wrapped up in the account balance of my demo account as I can with real money. Because at the end of the day it’s not about the money. At least right now. It’s all about being consistent and disciplined.

Yesterday’s positivity in the face of adversity was crushed today. I can only hope that the wisp of consistency and discipline that I felt within my grasp does not slip away for good.

Now for the gory details.

There was a strong up move during the 5:00 EDT. I generally like to keep the same bias that was shown during the 5:00 EDT hour so my first thought was to be long.

Bias: long
Conviction: medium

I then glanced at the 30 second chart and saw that it had just broken out a resistance level at 1.4245. My first instinct was to go with the breakout and being the impulsive trader I’ve become in recent weeks I dived straight in. Without even doing the rest of my analysis. I was in before I’d checked the economic calender for the day or seen what news items were swirling around.

What really surprises me in reviewing today is that I wasn’t looking for a false breakout right from the get-go. False breakouts have been my bread and butter for quite a while now and here I was jumping in straight away on a breakout! If anything demonstrates that my head needs time to settle when I first get started this is it.

So I jump on what looks like a breakout and then it immediately turns into a false breakout. And I mentally scream to myself, “It’s a false breakout!” And what do I do? Baulk at the 15 pips I’m down and hang on, instead of going, “Awesome! Time to flip!”. I should be doing a SAR if it’s a first leg and I’m been caught the wrong way. This is only a minor lesson to be learnt compared to the other two dosies from today, but it is something worth filing away and trying to apply when appropriate.

Not having done a complete analysis phase I was now less than prepared to figure how I should tackle adding new legs to my long position. In the heat of battle I’m more likely to miss things. This led to me blindly adding the second leg on the first push up that occurred.

The only number I then latched onto was 1.4220 which was yesterday’s high and was a definite S/R level. When price sliced through 1.4220 and dived towards my SL I didn’t know what to do. So in the end I did nothing and let my sequence be taken out for a 3% loss, which is around my standard ‘done for the day’ level.

In hindsight, the 1.4220 level was important. What I didn’t factor is that it was an important S/R level on the hourly chart which means that it is not going to be a precise level on the 30 second chart. Price may never reach it or breach it by a few pips and I have to consider both instances as valid S/R behaviour. To take into account this fudge factor it would have made more sense to have my uncle SL below the spike low from 5:44 EDT and to be safe put it under 1.4200 while I’m at it. If price had broken that sort of support then I would have been better served to switch to a short bias.

Instead I had a mental blank and went short on a double or nothing play. The red sequence then plays out all too familiar to both yesterday and Monday. Price crept back up to a prior high, bumping against a resistance level forming a contracting triangle before bursting higher. I had doubled up and done my usual averaging down sequence so when price breached the 1.4255 resistance level I was toast and took a much higher loss than I would have for a normal bad sequence.

The trades to have taken today were:

1. False breakout short at 5:59 EDT.
2. Long at 6:06 EDT once 1.4220 proved itself as support again.
3. Long at 6:26 EDT once 1.4255 resistance gave way after contracting triangle had formed.

There might have been for the remaining 30 minutes of the hour but I don’t have those on the chart below and they’re not that important compared to everything else that went down today.

Time to regroup over the weekend and come back on Monday with a positive attitude.