I just got out of one of the longest negative runs in quite some time. I had shorted the EUR/USD late in the morning on a friday, knowing it was currently in a bearish impulsive move. It had opened monday gap down and continued down for the next two days. First mistake, I did not hold on to the short until my goal ( something I am still learning to grapple ), second mistake, I thought I had covered the short at the bottom ( with no reason to believe this ) and taken a long.
The overall trend had been bullish for nearly a year, so this was a deep pull back and the bottom of a corrective structure , so going long only made sense, just not where I had entered. Knowing all of this made it possible for me to hold on to the trade until it came back. I closed it a less than a pip loss, since I don’t deserve the win, and at the very least it will make my losers average go down.
I have been not holding on to my winners as long as a could, but I have been holding on to them within context – either shorter because of small time frames, or because of dead cat bounces, etc,…. I know now I have developed some fairly bad habits, even though I am consistently pulling profits.
- I am still not setting stops for trades. I do have them mapped before placing the trade, and apparently still have a fear that my broker will take me out if I showed them the stop. Generally, this is fine as I check the market every hour or so, but when a impulsive move occurs against me and I am not looking, it can get real ugly super quick.
- Because I am not setting stops, I am not holding on to the winners to their full extent. As I said before, this major drop was because I didn’t hold on to the winner until it fully matured, making it impossible for me to keep things in perspective, allowing myself to go long without much reason to do so ( at least at the moment, I did have plans to go long but required a much lower price ).
- I am actually planning trades far in advance. I am using a check system to determine trend, current structure, and support and resistance ( which s&r was never a problem, but for whatever reason, trend direction and current structure was never part of my understanding )
- I have bounced back from major drawdowns multiple times proving that my emotional quotient involving the market and its effect on me is null and void. When I first started, I would hang on to losers in the hope that it would return, and it was a relentless grip. Now, I have mental stops that I adhere to with no problem. Understanding the risk and accepting the risk is two different functions of the brain, and it takes practice to accept the risk as part of doing business.
Bottom line, practice makes perfect, but perfect practice makes for a positive feedback loop. You know what you have to do, but putting that to practice is a whole different skillset, don’t quit.