Wednesday, October 15, 2008

When you don't want to take a loss you take a big loss

It all started nice with me trading with half size. I pick a spot that gave me nice profit at first, looking like the uptrend is failing. Then suddenly it turned and fly higher and I didn't get out. I add another half size short. Than I was sitting and counting ticks of losing trades. I re shorted with full size, double down. It went more up. Than slowly down, but eur was strong in comparison to gbp at that time so I took around -23 x 2 loss.
Than I decided to be clever and went long double size, well now market started to go down slowly and not up to test a high. I even add another long trade with double size so in the end I was trading 8x bigger than I started with my first trade. My idea of being conservative.

Well it was going happen sooner or later with the way I trade. I only learn in such situations because I get a kick. If I got b/e or small profit, I would do it all again. Now, I have a chance to learn. It's not disaster if I don't, one day I will learn.

So I lost -114 full size pips. Also this week my positions were 20% bigger than before.

To rub a salt little more down you can see a chart what happened later.


costar said...

Everyone's style is different but I don't understand this trade. The first short is after price makes a new high at 11:30. The 2nd and 3rd happen after big moves up.

All these trades are shorts when the price is making higher highs, and the 2nd and 3rd are after price is making higher lows.

Maybe you should consider making a trading rule that you only trade with the trend. The trend being defined as higher highs and lows, or lower highs and lows

FX said...

Well the first trade is the one I'm totally ok with. I saw some clues of possible top and stop of uptrend and I decided to risk a little.

Problem was that I got profit at first and was so sure that it's going down. When it broke up through my entry after that I made all my classic mistakes. I can't say a thing about that after, it was just hoping and averaging. I should get out at b/e at first trade or small loss as planned. But I usually do this averaging thing and sometimes I lose control.
I could stop at any point or at first close of -23x2.

Well I'm not so good at following my rules :)
Not averaging or taking small loses would be also good rules.

But I'm at a point that I want to be natural. So no rules that I can't commit to. If you press yourself too hard all the rules you follow and not standing behind them will some day backfire. So now I'm giving myself the freedom to do mistakes that I know in advance are mistakes. So until it's common sense to me to take small loss and move on this will happen.

4x For Life said...

Welcome to the club Ha remember -157
last week. I did not buy that bear trap this morning. I new it was coming. I will say your attitude is much better. So that says to me you are growing as a trader.

FX said...

Thanks very muck 4x, nice to hear that.

Well I just want to say that irrational behavior is just that, irrational. You can't do much about that, rational decisions are not going to work. It got to be your second nature, things that you count on in your trading.


I hate to say it friend, but I knew this was coming soon. I have literally just been checking your blog in anticipation of it. I honestly don't think you've felt enough pain yet to say "I will never allow myself to do this again!!!"

I am curious, what happened to your maximum 20 pip stop loss?

The thing I find funniest about this, is that both of us made a similar trade at nearly the exact time. your last blue triangle is when I shorted @ 1.3650 and your last orange triangle is where I took my profit @ 1.3640. I was completely done for the day with +1% Here is the chart ;)

What makes it even funnier is that I placed that trade IMMEDIATELY upon seeing the chart. Now, I don't care which way it goes (you already know that), but my instincts were telling me to go short. The point I want to make is that you took your losses and due to your emotional attachment the only way you could look at that chart is with a long bias now...

You said to Costar... "But I'm at a point that I want to be natural. So no rules that I can't commit to."

I am sure by that you meant "I want successful trading to be natural..." But if that is what you mean then you simply want your cake and eat it too...

It is quite evident to us all, that a persons natural instincts is exactly the opposite of what successful trading is about and if you don't want rules you can't commit to, then do not ever expect to be profitable. It's that simple.

All trading will be for you is a hobby that brings you more pain than pleasure until you COMMIT to bettering yourself and sticking to those unnatural rules... Trading comes natural to almost NO ONE, and anyone who now possesses the right mind as their "Nature" can only attribute it to having worked so hard and chipping away with "Rules (they at first) couldn't follow"

As always I mean these words in the best way and as constructive advice. Stop trying to be "Right" and realize this is simply a numbers game.

FX said...

Hi orion, nice to hear from you.

Well for me it was also evident that it will come, day like this. It could come on all other averaging days of mine lately. So because of that I don't make big deal out of it, I was also like waiting for it.

The thing about "natural". If I can't commit to cutting my loss on reasonable stop loss I don't want to push it. I tried before. Than I was cutting on some days but a day came when I didn't and all was the same. Mentally I know that stops are important thing and a must. If I can't emotionally follow it than I have a problem. I chose the way to solution without pressure. I want one day to wake up and when it's stop level just to take it, without thinking. I know now where is stop level but I do not take it. I will learn that faster like this, with running from stops and pain when big loss caught me. The thing about irrational behavior it will be like that and no rules (rational) can stop it.

I don't want to take a loss because I have a rule about it. I want to take it because it's reasonable thing to do and I want to do it in that particular moment in trade. I want it to be conscious decision and not some programed behavior. Until that day I'm prepared to make conscious mistakes like this.

Before I wasn't able to trade in direction of the trend or direction of break out, now I can. Like that there will be time when I just can take a stop loss as the easiest thing.
Maybe that day came,maybe it isn't yet, we will see.


Upon reading this again I noticed something...

You said..."I don't want to take a loss because I have a rule about it. I want to take it because it's reasonable thing to do and I want to do it in that particular moment in trade. I want it to be conscious decision and not some programed behavior."

Yes, long quote, but i realized this. Isn't ALL behavior PROGRAMMED behavior?!?! Really. All behaviors begin as thoughts, those thoughts are carried out as actions and repetition of those actions result in synapse in the brain that make "Habits" A.K.A "Programmed behavior". That same "subconscious" thing you do is a programmed behavior that at a time was NOT a programmed behavior.

The way I see it; the ONLY way to acquire the "NATURE" you desire is to perform what must be done, thus the only thing, the ONLY POSSIBLE outcome, is for that action to move from a conscious thought, to an unconscious one.

As an inexperienced person getting behind the wheel of a car, you have to pay close attention to every action you do just to stay in the lanes, but after such a time we can drive with our knees while eating and talking on the phone all at once. And the funny thing is ITS TRUE. Hope that helps.

FX said...

Well that is absolutely true what you are saying. The thing is I have a thought, I tried programming but I still have strong urge to do opposite. In that case I chose other way by addressing that urge and dealing with that. Pure programming doesn't work because urge to not take a loss override it.

New development is in progress and I believe that stops will not be issue to talk again. I believe that urge is neutralized. Let's wait new trades to see is it correct.


just keep in mind that the slowest changes tend to be the strongest and longest lasting, while the quicker changes tend to be more temporary. When you had your last blow up I was surprised at how quickly you thought you had fixed the problem.

Like you said though, we will see through the trades ;) Good luck to you!

FX said...

Believe it or not I still think that I'm in the same cycle after that big loss and that this all is just re figuring and readjusting aiming at fixing that same thing. I'm still under impression of that loss and this is all running away from the right track that is certainly coming but I'm approaching it backwards.