I just closed out a short position in the CADJPY for a 1.7% loss. I risked 2.8% of the account on this trade and I’m quite disappointed (again) how I handled it. My trading psychology is still getting the better of me at times, but I think with less frequency. This experience shows me that as a trader one needs to be ever vigilant of one’s own mind. I’ve just reviewed my trading journal and this is what it says at the start of the trade:

Felt quite anxious about taking this trade – fear of being wrong is one of them. Price action over the last few days has been a little choppy with long wicks and shadows on the candles. Everything else about the trade looks good. Took 10 pips of heat immediately on entering the trade which made me feel uneasy – not really enjoying the start of this trade.

Four hours later I wrote this

Market is very sluggish and not much movement, even after two news releases. Thinking of bailing out of this trade as I have spent four hours in the red with little movement. Placed a take-profit order to bail at +2 pips for a breakeven trade. Let’s see what the next four hours brings.

And later on that evening I wrote a similar thing, let’s get out at BE. Now, the interesting bit is what happened next. So, to recap, I got into a trade, it went immediately against me but not by much, the price action was tediously slow and sluggish almost like everyone was on holiday. I decided at that point that the trade was too risky to stay in it and to get out at breakeven.

The market then gathered momentum to the short side and I removed my take-profit order to get out. It moved +22 pips in my favour and I congratulated myself on what a great decision I had made. I tightened my stop to -1.7% of the account and went to bed. When I awoke the account was down 1%. I then decided to honour my intial decision and move the take profit target again to +2 pips for a breakeven trade. However, the market continued higher, the Bank of Canada released their cash rate decision ( I knew this too), and my stop loss got hit for -1.7% loss.

Now, I didn’t lose the original -2.8% that I originally risked, so it’s not all bad, however I made the same decision TWICE to get out of the trade, but I didn’t because of greed and hope. I’m glad that I am taking such copious notes of my actions and every trade I take on my live account is documented on this blog with screenshots of every trade posted to the MAX forum for all to see.

As a result of this trade, I am revisiting my trading plan, reviewing it and updating it to include a RULE to get out of trades on initial entry when there’s no momentum. That includes a trade that’s slightly in the red. I have realised that I have a desire to be proven right a lot of the time and I need to let go of that so that I can cut losers short. I don’t ever want my stop loss to be hit again through bad discipline. The stop loss is there for emergencies only. I’m still up +3.2% for the month so it’s not all bad, I am slowly getting to grips with it and slowly learning some hard lessons.

Sorry for the rambling but I had to get this off my chest, and I hope you get something out of it.