My last discretionary trade

Burn baby burn! The trade I have just executed is high risk and, if history is any guide, low reward. If I can be strong, it will be the last trade of its type. 

The trade: Following the dismal Chicago PMI and US consumer confidence data I have shorted cable at 1.9085, with an extremely tight stop at 1.9094. The pair looks to have firmly rejected 1.91 the figure and could be in the process of rolling over, along with EUR/USD. Historically, the Chicago PMI and consumer confidence data tends to have little impact on the dollar but the currency has recently been battered by a very poor run of fundamental data and weakness is clearly the path of least resistance. Yet I fight it. I am always fighting it. What is worse is that I am fighting the multi-day trend with an intraday position with a tight stop, and thus I am inviting failure. Previously, when I have called turning points correctly I have failed to follow the trend lower and have instead grabbed at the small profit on the table. So, during those few times when I have actually had a winning trade in my hands, I have killed it prematurely. The strategy magnifies and amplifies my many weaknesses. There is something in me telling me I ‘deserve’ to be punished, that I am not worthy of success. I think it was Ed Seykota who said everybody gets what they want out of the market.

I expect this trade to fail. It deserves to fail. I am off to have my dinner and will provide an update before day is through.

Update (8:39 pm): Cable failed to roll-over as predicted. At one point the trade was 10 pips out of the money, then it moved 10 pips in the money. After my dinner, when the position was some 5 pips in the money, I moved the stop-loss to break-even and left it at that. Of course, such a tight stop is borderline useless and I may as well have taken the few pips that were available. The position was stopped out at break-even.  To repeat what I said earlier ‘If I can be strong, it will be the last trade of its type. ‘

gbpusd-post-chicago-pmi.jpg

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9 responses to “My last discretionary trade

  1. Have you thought about taking a break from trading live, and do some more research, learning, self hypnosis, and develop a strategy that would allow you to trade confidently?
    Also not sure if this is helpful, perhaps you could experiment with “mental stops” instead of hard stops. Knowing exactly where to take profit if it’s a winner, and exactly where to take a loss when it’s a losing trade, my performance has increased tremendously and maybe it could do the same for you.

    I hope the best for you.

  2. I have been trading the market for close to 30-years, not p.a but in the city and a key thing I’ve learnt is that CABLE is a vicious currency pair to trade. You can’t have a stop as close as you did!
    The way to approach any future trading is took look at charts significantly longer than 5 minutes – 2 hourlies at the absolute minimum.

    Certainly in CABLE 1.9105 would be regarded as a break of 1.9100 in the markets. Even 1.9115 in certain circumstances.

    Take smaller positions with risk levels at levels where you would be clearly wrong.

  3. Rocko,

    Thanks for the comments. The idea of self-hypnosis is relevant because I created a profitable system but I lacked the ‘will’. Actually, I suppose it is less of a system and more a of ‘trading approach’. I will write more on this as the days go by, but the rub of it is that the approach produced nice profits. Then why the demise? I used the profits to throw money at new trading experiments knowing that I always had something to fall back on (my core strategy). My thinking was that it wasn’t prudent to rely on one approach. I was wrong. I should have allocated all my capital to this approach. When things started to turn sour I returned to my original trading strategy but allocated so much capital to a handful of trades whose outcomes, how should I say, fell on the wrong side of the ledger. Things quickly spiralled out of control and I find myself here. Now my core strategy may be wobbling over…if it is, I am done for.

    The good news: It seems as if you are doing well and I wish you continued success.

  4. Allan, your sage advice, backed up by your many years of experience, is heeded and appreciated. Smaller positions and wider risk tolerance was the way to go. On balance, my account would have been much stronger if I had followed this simple advice. I will bear this in mind in the future, if I ever return to trading.

    For now, however, this is not an option. Because my core strategy only involves a handful of trades every month, and because I am coming from a very low base (£3500), my hand is forced. I may be setting my self up for failure but I feel I have to take big risks because of where I am in the game.

    I am really thankful for your and Rocko’s charitable comments.

  5. Caravaggio,
    There are brokers who allow for micro-lots, with risk as little as only $0.10 USD per pip.
    e.g. http://www.fxsol.com/, and http://www.interbankfx.com

    You should be able to make it so that you risk no more than 1% per trade, this way you’ll always weather the strings of losing trades and make a come back given you trade your system with discipline.

    What has helped me mentally and could also help you, is to go through your trades in your mind before trading each day. This is one form of self-hypnosis, to imagine yourself entering trade without hesitation when you see your setup, and exiting on both winning trades and losing trades exactly according to plan.
    Another technique that’s really helped me was dissociation. When I’m in a trade, I picture seeing myself from a 3rd person view, doing exactly what a disciplined trader does, which is waiting patiently for profit to hit target levels, and exiting exactly according to plan if it’s a losing trade.

    I hope that helped a bit more 🙂

  6. Pingback: Sage advice « the 3500

  7. Thanks Rocko. Mental preparation and a 3rd person perspective are key if I am to stand a chance. If I display any weakness from here on it’s all over.
    That said, there is a big difference between knowing what is right and doing what it right. Afterall, I believe I have known the right path for the two years that I have been trading, I just haven’t been able to follow it due to what can only be described as an innate weakness.

  8. “After all, I believe I have known the right path for the two years that I have been trading…” How about taking a deep breath, and just get away from the tensions of trading for a day or two? Once you can hear yourself think objectively, sit and write up a list of things you know would make trading profitable, then stick it next to the computer monitor, wall, pillow… etc. and follow it religiously?
    Following the right path becomes easier when you have something to remind you at all times.

  9. Pingback: Week 1 FX trading results « the 3500

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