This month I made the biggest mistake trading – of my life. It’s a mistake I have learned from and one which I never, ever want to repeat. I failed to close a position when it was going against me. This was literally the most costly mistake I’ve ever made and i’ve never had suck a lack of discipline in my trading previously. I explain below.
Biggest mistake trading – EUR/JPY
I entered this market obviously with a view to making a profit. The trade went against me but it moved so quickly that I lost my discipline and control at the point where it was at my stop loss level. I usually close trades manually and I still am minded to continue this practice because it usually allows me to analyse what’s going on at the time, under a microscope, so as to not close trades prematurely. However, on this occasion, the EUR/JPY price sailed down so fast I was not thinking clearly and as it went further against me, it was even more difficult to close. I’m sharing below the point where I was sitting in the trade per the 30m timeframe. I exited the trade somewhere on it’s way back up after sitting there watching it until 3am… I had initially thought it was recovering but then the huge green candle formed with the enormous bottom wick, seen below. It was here I exited the trade because I had no idea where the price would end up and doing some analysis on the daily timeframe, I decided the price had the potential to soar down to the EMA line on daily timeframe, and this would have put me into the red for a value which would have represented about 75% of my entire trading capital balance! I felt obliged to close the trade on that large green candle. I felt relieved once the trade was closed.
You will see below that the price did in fact recover which is frustrating for any trader to note, following a loss – but especially following a particularly large loss! However, any decisions we make are ‘in the moment’ – we do not have a crystal ball.
What did it cost me?
This mistake cost me 10% of my trading capital balance. It was a very costly mistake. It should have merely cost me 1% which is my usual loss tolerance. However, it could have been worse and as I said above, I was filled with relief once I had closed the position. It has set me back in my overall growth plan for my trading account.
The lesson which has been learned by me
After this experience, I will never, ever, hold a position open again when it has moved against me and reached my pre-planned stop level. I also learnt something about myself – that I am capable of momentary lapses of discipline. As traders we need to learn from these mistakes, forgive ourselves and plan how to move forward effectively. Trading is very emotional and we are not algorithms. Trading can be affected at any one moment by personal circumstances or worries/concerns completley unrelated to trading. Even hormones can affect the way someone behaves on a given day. I am usually a very disciplined trader and I am disciplined in many different aspects of my life so I really did surprise myself this month – but knowing this was out of character, I am confident that I will never allow this to happen again. It was completely counterproductive – it will take me about two months to catch up and get back to the account size I would have been at, had I not made the error.
I am now forgiving myself and moving forward.
I hope you found this blog post helpful and it helps someone else to avoid losing money/perhaps it will help someone else to have the courage to close a position when things have gone badly wrong!
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