Markets move up and down by the second, the minute, the hour etc; we can see this and are also taught this from our first trading tutorials; resistance, support, supply, demand etc. From another perspective however, there are no two ways about it, the market is either going up or going down and when you are on the wrong side of that movement, the results can be costly. As a matter of fact, through your trading journey, you will quite often find yourself in negative equity, why? Well, the answer is this, the moment you open a position whether it be short (betting the market is going down) or long (betting the market is moving up) you are exposed; your capital is now at risk. How much risk is down to your method, your experience and I want to say emotions, reason being, when we trade, we should not be making decisions on emotions, however, during market exposure and risk, your emotions are bound to come out and play.
This week has been a perfect example for me to remember how badly things can go and what NOT to do during time of volatility and uncertainty; Brexit, for instance. It started the end of last week 29th March I opened my trade (GBP/JPY – Short), bear in mind it is a little foolish to have been trading Brexit these past couple of weeks anyway, considering how messy and congested the GBP products are right now. So, first mistake, it is recommended not to trade at such high volatility as the movements are fast, unpredictable and you haven’t got time to watch the markets all day as we are trading between our day jobs.
I had followed my methods on this trade. I had considered the risks; extremely high, I checked my charts, we were at a breaking point (to the down side). The previous week had market sentiment, politics and news coverage pointing to the downside, I was on top of my game, this was going to be the best trade of the year, mega profits, the analysts and brokers also suggested it was happening.
It’s now Monday morning, sentiment has changed to the opposite direction, already. The governments took a U-Turn on Brexit and everything about Brexit, the GBP/JPY breakdown hasn’t happened, the markets are moving against my position and fast. Mistaken I was, another Mistake I had made; No Stop Loss. For those not in the know, a Stop Loss is a set price of which you can agree to have your trade automatically cancelled, thus, minimizing losses. Why didn’t I set the stop loss? Quite frankly, I don’t know, another mistake; I had let my guard down, perhaps not totally focused, over confident, I thought I knew the Market.
So, before I know it I am 3 days in the red, my emotions have kicked in, I am stressed, I feel sick at times as I placed massive bets, my whole trading account was at a 25% loss, my biggest yet and in just 3 days, I hadn’t slept properly, my partner was annoyed as I was glued to a screen most of the evenings, my attention was completely on this loss, not my home life or my work life in fact. When I was away from the charts, I didn’t know what was happening I thought my account could be closed out at any minute, yet I couldn’t just close the position and accept this major loss.
What a roller-coaster! I have loved it, hated it and felt like shutting it all down, getting a ‘real hobby’ but, I can announce, I am still on this trade, and the market has turned, so I guess I got lucky in the end.
Some pointers here should be noted, I mentioned a few during my experience such as volatile times, believing you know the market more than you probably do, using a stop loss. I have also learnt how to rid ourselves of having to watch the markets 24/7 and it’s actually really simple, all this could have been prevented if I had set up my Price Alerts; for us part-time traders these are a mega factor in our trading lives, I might even go a bit further in another post. Basically, Price Alerts can be set for crucial price points on your charts, the ones you seem to be looking for as you stare profusely at this moving candle sticks, waiting for them to hit. Notifications of Product prices can be sent to your phone via SMS, E-mail, and through the App Notifications, and this is the best resource you can use. You won’t be starring at charts, instead you can let your phone alert you, whilst you keep focused on your job or home life.
Thanks for reading, I am not a writer, but a trader so forgive me for my literature; the errors and readability. I also hope you have picked up on some pointers to avoid my biggest mistake yet and maybe encouragement to get talking more about how we can trade the markets around our busy lives. If you pick up on more mistakes from this trade, I’m happy to hear them, but please do follow up with some friendly advice.
I’m always open to chat further about trading and hear other people’s experiences, tips and knowledge…I certainly need it!