Missed the boat!

Today the ASX 200 had one of it’s worst open weeks in a over month.  The index dropped 70 points across the whole day ending at it’s lowest level around 5,409.

Firstly, I missed the opening of the market (thanks to a certain little boy waking around 5am).  This was very dramatic and I’m hoping to catch it again tomorrow morning.

I had quite a few good positions which I gave up too easily due to momentary price swings hitting my very conservative take loss orders.

All up I finished around –$35 which was pretty silly considering what happened in the market. I am learning and today was a great example of trying to not guess when the market is changing. 

Hopefully tomorrow will be better.

How do you cut your losses?

After the last couple of days getting hit by the market, I have to admit my confidence has take a bit of a toll.  Today, I took another loss and in some ways I’m pretty proud of the final decision.  Clearly I have a lot to learn and cutting your losses well is probably the hardest thing to learn when trading.

The day started off okay, I expected the market to drop (ASX-200) as the overseas markets had all taken a hit overnight.  The market opened and it dropped as expected *happy*, then quickly bounced backup but I took a little cash (1) there before complete reversal occurred.

Okay, lets revaluate the market.  Maybe the bulls are going to dominate? Okay lets switch to Buying and took some money on a very small contract (2).  Great lets make some money.  Doubled up on my contract (3) and got spooked as the market quickly dropped.

The market bounced again and reversed quickly upwards I made a little money here (4).  Big deep breath.  My running tally is slightly negative –$13.25.  Today’s target is $100.

At this point I’m confused - What is going on with the market? Is it going up or down or sideways? So I walked away to get a coffee and chat to my wife. After the last couple of really bad experiences I am fairly determined to do better today.

Okay I’m only slightly down and return to see the market is going up and showing what appeared to be a bullish market.  Great – lets make some money! I open a BUYING contract (5) and then BAM market quickly switches.  SH#T!

Now I made a mistake and double down on the same trade believing it is going to switch back to an upwards trend (I thought I had written something about not predicting market changes)

Okay now I have two BUYING contracts and the market is now strongly trending downwards.  I’m headed towards my stop losses and it occurs to me I don’t actually know how to ‘successfully’ close off a losing day.  My trading strategy is to only risk $100 or make $100 and between points 5 and 6 I’m down $160.  If you factor in the previous tally of –$13.25 I’m nearly down twice my acceptable losses.

I’m on a white knuckle death ride down and I’m literally saying out loud what price I will accept at –$120 I’m saying I will take –$80. 

-$140 – I will take –$110
-$160 – I will take –$120… maybe even –$140

The market creeps back up.  I’m not out of the woods by any stretch and indeed I even could close at –$90. But hope has also risen.

This is tricky stuff.

I don’t want to hit the stop loss because if I do then I’m mostly well over –$200 (twice my so called acceptable loss target)

So what will I accept?

Or will I believe in hope of recovery?

The price creeps up a little more, hope shines brighter…

Down! Down! Down!

Damn…. should have taken the –$70!  I’m back to chanting which prices will be acceptable (never the current prices apparently)

That is when the market hits it’s lowest point yet and then miraculously then market starts to run back up.  -100, -80, -85, -80, -75, -70… 

Which exit price should I take? the price sits on –$45 for almost a minute while I agonise over this dilemma.  I even call my wife over to ask her opinion.  She advises to wait and no sooner than that it falls dramatically and I cancel the contract as soon as possible (-$70).

Total losses for the day? –$133.25.

Lesson to be learned? My contracts are too big.  No one contract should be big enough to wipe me out for the day.  I always get too impatient with the smaller 0.5 sized contract, but maybe this is the right size for me at this early stage of learning.

Did I do the right thing? I am very happy that I only took a small loss in the end.  But skated very close to taking another third big loss in straight sets.

Time to find a real job?

Warning – Market is Closing!

I hit my stop losses twice today.  Once was a freak spike at the close of the market the other simply an unexpected turn in direction.

Thank goodness for stop losses!

But really do you want to ever hit these? or would you rather take your loss earlier?  I would rather lose earlier but then why not move your stop losses closer.

Effectively I shouldn’t have re entered the market – I was already up in the morning.  Sigh!

SILLY BOY.

Also just to point out, one of your contracts was too large again.  Don’t think because the market is seemingly quiet that it can’t still whip your butt!

Lessons learned?

1. Avoid trading if you have already hit your target.
2. Limit the size of your contracts to acceptable risk
3. Avoid trading near the close of market – it is rather turbulent
4. You got caught trying to predict a change in market direction AGAIN!

Just got my butt kicked by the AUD/USD!

Ah humble pie doesn’t taste particularly nice.  But great things can be learned if we just try and apply the lessons learned.  Painful lessons should be easier than others of course – but I’m not leaving this to chance.

Today the AUD/USD pair kicked my butt to the tune of 6.5% of my bank roll.  It shouldn’t have happened and I’m going to explain where I went wrong and what should have happened instead.  As they say hindsight has 20/20 vision (I also call it a bi#ch) and nobody is perfect, but silly mistakes should be avoidable.

Mistake #1

Betting against the market.

This is really very simple, if the marketing is strongly trending one way why try and turn that tide?  You want to make money not change the course of history.  If the market is trending up – BUY and if it is trending down – SELL.  Simple.

I’m not sure why I keep doing this and today I didn’t get away with it.  The AUD dollar was really pushing up against the USD, it was a very strong obvious trend.  And yet I couldn’t resist selling thinking I knew when the bull market had had their fill.

Mistake #2

Why make the wrong bet once when you can make it multiple times?

I struggled to cut my losses or even reassess my initial take on the market (I was expecting a turn in direction). So when the market moved up another level instead of cutting my loss I doubled up and made another selling contract.  In the end I made 4 selling contracts which all went to Stop loss or were cancelled without profit.

At one stage I actually opened a BUYING contract only to cancel it minutes later I was so sure the market had finally turned.

Mistake #3

Failing to walk away from the loss.

My trading strategy is simple – only risk a small percentage of the bank roll.  In this case because I’m still learning I have set that to be 1% (max 3%).  The idea being if you limit your risk to a small percentage you can ‘survive’ multiple bad trading days.  Ideally if you hit a loss or profit equal to this amount you call it a day and leave with your winnings or a small lose. 

I failed in this, I couldn’t believe the market could just simply stay so bullish – IT HAS TO TURN!  So after losing 3% of my bank roll I did something really stupid.  I made another trade.  Guess what I lost this one as well.

This last trade is really the main lesson for today.  It shouldn’t have been made on so many levels. 

1. I was really over my daily limit.
2. I didn’t reassess the market (should have been BUYING).
3. I took out a contract with too much risk.

Even now I can’t believe I doubled up on a really expensive and wrong market assessment.

STUPID.

I'm starting to Learn CFD trading

I'm just starting to learn how to CFD trade, I'm all signed up and starting making some money, then something went wrong.  I had a really bad day where I lost 6.5% of my bank roll!  Not nice and shouldn't have happened.

As with all things that could have been avoided, it was a shock and made me take stock.  How did I end up in such a terrible trade?  What did I really just throw away my money for?

I'm learning and there has to be some grace involved in this process, but I determined right then and there to document these lessons for future remembrance and hopefully I can avoid repeating the same mistakes.

Good trading all!