DON'T TRADE AGAINST THE TREND!

Another day, another trading lesson handed out to me by the markets. In what should have been the most profitable day yet, ended up my biggest losing day yet. The quote above was from yesterdays report, and, if followed yesterday, there was many hundreds of pips on offer. Instead I spent the day trying to pick reversals, despite the strongest trend shown since I had started trading.

Now to be honest, I was just about ready to throw the laptop over the balcony by the end of the trading day, with all kinds of things going wrong, going against the trend, then trying to go with it when the market stalled, sloppy stop loss placements, typo's that meant I placed a 115 pip stop loss instead of 15 pips, all kind if things. Meanwhile reports of great profits were coming into chat rooms as I looked at a host of red numbers.

After a good sleep however, yesterday must just prove to be the most educational trading day I have gone through yet, and only confirms how far away I am from achieving my aim of trading the markets professionally. So how SHOULD have yesterdau been traded? Well hindsight of course is a wonderful thing, but let's look at a chart from yesterday.



Above is the 15M chart of the USD/JPY yesterday. You can see strong downtrend as the USD weakened against most of the currency pairs for most of the day. Sometimes the easiest methods are the best, and if all you did yesterday was follow the trend, selling the pair when it rallied back to the trend line shown above, taking profits as the prices started it's move back to the trend line, you would have been in for a very successful day. This pattern was the same on just about every EUR and USD chart, and, in hindsight seems like a no brainer doesn't it :). Now the beauty of going with the trend is, theoretically, you can only be wrong once (when the trend changes or stalls as shown above at the bottom of the chart).

So what is to be learnt from a day like yesterday?

1. Don't get over-confident if you have been successful recently, the markets WILL get revenge if you become complacent.
   
2. Don't chase your tail, trying to get revenge on a big loss.
3. Recognise the trend and stick with it, if it reverses/pauses, stand aside until a clear direction is formed.
4. Keep emotions out of trading, there is no place for them, and will only lead to irrational decisions.
5. Know when to call it a day.

Finally, a comment about Marketiva and the chat room talk. Most people in the chat rooms tend to be beginners (just like me), so be careful about what advice you take. Really there is no better advice than the little voice in your head, and it is in your best interest to discovere things for yourself, if you don't, you may not understand why something happens, and will find it hard to recognise the same set-up again in the future. Of course, ask advice, but be sure to review the advice, look at the charts, news etc. yourself and see if you agree with it yourself. I am logged in most of the Asian session and early Europe and many times I see a tip from someone who started trading the day before, the price moves in that direction, and another beginner then begs for more tips from that person assuming they are an experience trader giving profound insight into the markets, only to find the next tip turns out the exact opposite.

When I hear then that they are trading live, it make me cringe at the stress that the person is probably feeling watching their hard earned going down the drain. This has been bugging me, so thought I would get it off my chest :).

Ok happy trading!

Today's result: -89 pips | Overall: -122 pips

This entry was posted on Thursday, September 22, 2005 at 8:28:00 AM. You can skip to the end and leave a response.