[Flojomojo]

Yes, you have read correctly. This is going to be a thread about trades and actions we all wish we would have never done, however small or large they are. Forums are often packed with trades that “worked out” and lots of smart people contribute to the wisdom of “how to do it right”. And yes, the painful thing is that they are right! Nevertheless things turn out ugly sometimes giving us a slap in our face and pulling us in the woulda-coulda-shoulda ill circle. It is our human nature that makes us more comfortable talking about the things that went right in forums like TL. But it is the mistakes that we make that push our limits and let our experiences grow.

I know it is hard to let down your pants and openly talk about something that went (horribly) wrong, especially as it might reduce the respect you receive from fellow traders. So why should you contribute here?

As for me I sometimes find it hard to put down my mistakes on a piece of paper simply because ignoring them is easier to handle psychologically. This thread should give you and me the opportunity to openly admit, analyze and discuss our mistakes. Forcing us to write about one of our mistakes makes us deal more intensely with our experience and lets it sink in deeper into our actions. Things that you post here should also stand in your log/journal! As this thread should reflect real time experience with real money lost (or better: given to another trader) it should give new and potential traders the insight of what stumbling blocks they will encounter and how it might affect their account balance.

I hope such a thread does not scare people and adds to the great learning experience TL has to offer.

[Flojomojo]

Let me make the first contribution with something that happened to me in November:

Just like with airplane accidents I happen to crash when more than one mistake comes together. Then the human factor has it easy to short circuit my actions, ending in disaster.

Let me start by elaborating a fatal error I made last month:

Point 1 in charts:
The sideway market action in the last couple of days got me a bit frustrated with my system. Although I was nicely in profit I was unsatisfied with my entries. It was a pain to see my trades get stopped out only to see price rebound in my direction after some time. Looking back it seems so natural for a sideway market, but back then I just thought !God damn, why didn’t I hold longer! And it was exactly this thought that would cause my doom! This was the situation: My system indicated that downward pressure was starting to move into the driving seat. This meant being short was the primary choice. I say “being” because I wasn’t.

• Fatal decision 1: As by the look of the chart and important news coming up I saw the opportunity for a quick long scalp. Nevertheless as pressure was down I should have looked for a short opportunity!

• Fatal decision 2: Due to the sideway action I was desperate for a profit. In order to squeeze out the maximum of my scalp I put on a position way above my water mark. Also the potential stop indicated that the risk reward ratio was not justified!

• Fatal decision 3: Alarm bells were ringing in my head. Nevertheless I put on the trade…and it didn’t work out! Price was falling towards my stop. The “pain” started to creep in. The “why did I” thoughts started circulating in my head. Emotions took over. And now came the fatal part: I searched for a reason that justified to let the trade run. And I found this reason in the frustration with the sideway market thinking…”well, it will rebound”. That was the decision that made me sit in front of the screen only to see two months of profit evaporate in half an hour!

• Fatal decision 4: Although I was in “it will rebound”-mode I did not ask myself: Where is the next support? The answer to the question would have been “Too far away for this size!”

When my account balance was back at my initial level I decided to close the trade. What surprised me was the calmness with which I took the hit. It was almost like: I know why I %&$§?” up and I deserve the outcome, so no reason to bang my head against the wall. The very next day I saw price rising to a level that would have given me 50% account profit on the trade, but with the -30% that I would have had to endure it would have still been a bad trade. A bad trade stays a bad trade even when profitable.

Lessons learned:

• ONLY trade in the direction that your system tells you
• Use only size that you are willing to take considering the distance to the stop
• Desperation for profit is not a reason to trade
• Don’t find excuses for a decision that turns out to be wrong