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The 22 Days: A Price Action Trader shares his Journey
There was a special trading session on Saturday. I observed the market but did not trade.
I did see shorting opportunity but since it was a weekend and was not on my regular scehduled trading plan I did not trade.
However the day was a trend from the open day with the bear being expected.
5th March 2012
09:15 AM: Market Open
Covered my short position by buying one ABB future contract at 814.
12:45 PM: Pinbar - went short below its low at 805.9
01:25 PM: Covered my shorts... saw price at 801.7 but managed to get filled only at 804 because I did not have a clear exit plan. Bearish followthrough expected tomorrow, but so show of bullish stength will be good to initiate shorts again.
Can you help answer these questions from other members on NexusFi?
Having prided myself for following my plan for the past week, and also because my daughter was not well, I did not really plan in the pre-market except a groggy decision to take short only trades.
My Actions Today:
The market opened at 738 wwhich means multiple swing highs were broken which signaled a reversal hence I executed a buy order at 793 and immediately covered at 799. However, instead of waiting for a setup to form I simply thought I would miss a short entry and went short at 799 and then the market traded higher and reached 800, 805, 810, 814 and yet I watched without a stop in the market.
The proper price to go short would have been 814 since it was a resistance level being a swing low – however the daily chart was forming a wedge and this spike in early trading was thus signaling a wedge reversal and hence I should not have initated short positions at all.
The day ended in a loss since I sold at 799 and covered at 809, though the market gave brief opportunites by ticking down to 805.
I also had no target price in mind and could have covered the short positions at 797 had I got the targets set in time and considering that this might be part of a wedge reversal or a pullback on the daily chart.
Emotional Trading and what to do about it:
Even though I was correct in my analysis I froze and would not take a loss. Mistake 1.
Inspite of great analysis I did not take action to cover my positions, mainly because I froze in the game above.
So what made me trade like this?
- Wanting to trade and make a profit without proper planning, based only on ‘the general direction of the market’. “Thought” I had a plan.
- Thinking that I will be right ‘eventually’ and will look like a fool right now if I get out. Another symptom of the first malady described above.
- Finally, panicking and then taking a loss at an inopportune moment (also note that with proper planning it is only rarely possible to get into such situations where you are deep in the water and try to get out at the deepest point when submerged).
All of the above make me an amateur again and serve as a reminder that you can allow ego to lose more than you have gained over the past many many days. It also makes me remember the precept that you can have a huge number of losing trades if they are adhering to the plan and yet be profitable because of the risk-reward ration and the probability based on your market-reading (which is the last thing I list her – it is important to be right but it is also important to be able to know when you are wrong and ash quickly for the exits in such situations).
It feels like making me read Magee's book all over again. Not ‘Technical Analysis of Stock Trends’ but his other not so well known epitome on The Semantics of Wall Street. (now known by various names).
I believe it is the wrong question to ask in any type of trading.
Market direction matters, but only is 40% or so part of the big picture.
The remaining 60% is a what-if analysis.
- What do you do if price reaches here? here? and here?
- What would happen to your account if the stop loss order didn't execute? What? You don't HAVE a stop loss order?
So much for mental stops in a 24-hour Forex market.
Anyways, I am currently 'bullish' (bullish? on a pair?) on the EURUSD having placed a buy order at 1.3100 - perhaps it will go down further and trade at 1.3050 (much below which I have a stop loss order)
dbphoenix was always shrouded in intrigue that comes from having an online-only identity and became a legend. He was a phenomenon on all the boards he visited. Unfortunately he seems to have gone underground - I can picture him with his ready wit preparing for the trading day and effortlessly calling tops, bottoms and everything in between.
Perhaps we should have a thread 'The Wit and Wisdom of dbphoenix' just like dbphoenix started threads titled 'The Wit and Wisdom of Richard Wyckoff' and 'The Wit and Wisdom of Justin Mamis'.
Just like Richard Wyckoff eventually became rich enough to have a mansion besides the industrialist Alfred Sloan, maybe we might come across dbphoenix in a similar neighbourhood and recognize him as such from his style of conversation. Till then we are on our own... actually traders are always on their own, but people like dbphoenix volunteer to turn into signposts for the benefit of beginners and all those who are yet to taste success in this ruthless arena.
Why he left may be best understood by him alone, but just like some saints in India who left the material world behind at age 19, he may have stopped posting because he felt he had served his purpose of community service and imparted everything there was to impart.
I will simply say that I erred today. Mistake 1 - I froze. I tend to freeze when the market makes a quick sharp move before I enter a stop loss order and I realize that the stop loss order has already had the stop loss trigger even before I have placed it. Today it cost me a significant portion of my account. Not the usual 2% (where the stop would have been, much much more).
To cut the story short, I shorted at 02:00 PM at 814 and then price thrust upwards. The market moved. I did not move. I stood still, grew roots and froze. I let the market grow over me. A little voice in my head (but belonging to John Maynard Keynes) whispered at the market close (where I dumped my shorts and covered at 826): "Markets can remain irrational for more time than you can remain solvent."
I entered hurriedly on the day I had "forecasted" EURUSD about to begin a bull trend and got filled at 1.3150.
It has paid off very nicely, and serves as a reminder that making money in trading is partly about entering on pullbacks having good R:R
From the daily chart it seems that EURUSD is headed all the way up to 1.4200, which is my "long term" target.
But I must confess that I AM getting ITCHY leaving all those profits exposed to the market to gobble up. My stop is still a bit below 1.3050 and I haven't yet moved it to breakeven and have not yet found a logical place other than breakeven. Never EVER allow a profitable trade to become a loss.
