Weekly Report: Jack’s “Zero to a Million” Trading Disaster

maverick_article

 

Oh, come on, you wanted to see me make the money TWICE, right? 🙂

No profession requires more hard work, intelligence, patience, and emotional discipline than successful speculation.” – Robert Rhea

Ain’t THAT the truth! (weary sigh)

Don’t worry – I can get us out of this mess (I think).

Well, let’s see, last week the account was up 50% for the week…now the account is down 50% from our starting point. We don’t have enough space here for me to recount every mistake I made during Monday’s trading (and to a lesser extent Tuesday – I almost resurrected things a bit Thursday, but I was skittish and ran my stops too tight). Suffice it to say that I broke every rule in my own book – but I’ll cringe my way through hitting a few of the highlights…lowlights, that is.

By the way, you didn’t really think I was going to completely blow out the account, did you? Oh, ye of little faith. 🙂

All right, let’s see…the main one, the absolute worst thing I did was violate my own rule of never dropping more than 20% of my equity in one day. Even with every other stupid thing I did, if I’d just stuck by that one rule, well, we’d probably still have at least $150-$200 in the account.

I shouldn’t even have been trading Monday. Trading is often a battle with your own emotions, and I had way too much distracting personal stuff going on. I should have realized that when my very first trade of the day, I was so distracted that I entered a trade for one standard lot – ten times bigger than the mini lot I meant to enter. That was a $10 loss the second I entered it.

What other lessons can we re-learn here? Being “right” can get you killed if your timing isn’t right, too. Everything I lost a small fortune betting on Monday happened on Wednesday and Thursday. My timing was off. I probably should, but I don’t take too much comfort in recalling that Jesse Livermore lost $100,000 once when he was “right”, but too early in entering the market. I do take comfort in recalling that he made it back later, and more, when his timing and his market analysis were right.

Don’t keep chasing your mistakes. It’s fine to take a shot at picking a top or bottom…but it’s not all right to take 6 or 7 shots at it one day. Which brings us to an excellent trading maxim – “Trade what you see, not what you expect”. That sounds really simple, but it can be oh so hard to abide by sometimes. No matter how much you anticipate Eur/Usd going down, if you see it going up and up…well, the odds are very high that the market is right and you are wrong.

All I can say is that I apologize for temporarily losing my mind, and I promise to try to behave and be good as we re-start our million dollar forex journey (hey, I only set us back two weeks – you can wait an extra two weeks for a million dollars, can’t you?).

Let’s look at a trade from Wednesday of this week to illustrate how it can be helpful to put a trade on in multiple parts. (We’re using a trade from Wednesday because I can’t bear to look at my trading journal from Monday yet – I’m still licking my wounds.) Okay, chart and analysis below. By the way, do you notice I have a fondness for the Aussie (Aud)? Yeah, well, that kind of bias can also get one in trouble. Love and hate all currency pairs equally.

maverick_chart

Looking at the left hand side of the chart, I jumped on this buy of Aud/Usd just as it crossed the 50 EMA (the blue line), at .9238, with a stop at .9231, just a click off the low. Then, after it had gone up and retraced back down to the 10 EMA about 4 candles later, I picked up the second part of my buy at .9242. It then failed at the .9250 level (next candle with a long wick on top). So now I’ve got two buys at about the same level. After surviving the next couple of candles, I moved my stop on both trades up to .9237, just a few pips below the 50 EMA. The market washed along for about 3 annoying hours, never attempting the .9250 level, but never falling back below the .9240 level either. The daily pivot was up at .9261. So here’s what I did – I put in an order to buy another 5 micro lots on a buy stop at .9251. As you can see in the middle of the chart, the market did make a move up triggering that buy order. I immediately moved all my stops up to .9243, locking in at least a small profit on my first two buys – my reasoning was as follows: After sitting dead for so long, if this was a legitimate move up, it should continue on up toward that .9261 pivot level without retracing much once it cleared .9250. The market did indeed rise to the pivot level of .9261, but never got more than a couple of pips past it. I gave it about 5 minutes to decisively clear the pivot level to the upside – when it didn’t, I closed out my .9251 buy at .9259. Then I moved my stops up – on my .9242 buy, I put the stop at .9251, again thinking that if the move up was for real, they’d clear the pivot and make a new high before backing up 10 pips – on my .9238 buy, I moved the stop up to .9247 (that way if I was just a bit too tight with the other stop, I might at least be able to still hold one position if the market headed back up). Well, as you can see by looking at the action that followed, I played that about as well as I could, and even though the market took a tumble back down below all my buy points, I had nonetheless made about 8 pips profit on each of the three buys. (Of course, if I’d been really smart, I’d have reversed and gone short after getting stopped out of the last trade…but that’s just 20/20 hindsight talking.)

 

One more thing I wanted to mention this week – you have to balance patience, which is important, with the courage to pull the trigger when you think the time and price is right. Too many traders, myself included, have a bad habit of doing the following: With Gbp/Usd drifting downward, you’ve identified support at 1.6500…You’ve waited patiently for the market to dip down to that support level, and now it’s there – 1.6504, 1.6503, 1.6502 – when all of a sudden, you get the jitters, you start worrying, “Maybe it’s going lower, maybe I should wait for 1.6480 or 1.6450”…as you hesitate, the market moves back up to 1.6506 – now you’re thinking, “I should have pounced on it at 1.6502!”…1.6507, 1.6508, 1.6509, 1.6510 – “Oh no, it’s getting away!” – you hit the buy button, get a 1.6511 fill, and the market promptly falls back to 1.6504 – and now you’re sitting in the trade with a 7 pip loss rather than 1 or 2 pip profit. Sound familiar? – Yeah, we’ve all done it. The great speculator, Bernard Baruch, wrote, “I have heard many men talk intelligently – even brilliantly — about something, only to see them proven powerless when it comes to acting on what they believe.” He added that if you wait till the move is apparent to everyone, it’s too late. That’s a fact.

 

All right, I’ve taken up enough space here for one week.

 

I’ll behave, I’ll behave. When I get the account back up to $265, I won’t let it drop below $200 the next day.

What can I say? I’ve been trading for years, and yet I’m still vulnerable to the same classic trading mistakes that everyone else is. Unfortunately, I apparently thought I was invulnerable there for a moment or two. Well, I got one hell of a rude awakening.

 

One specific trade idea to consider – I entered a longer term trade, selling short Usd/Sgd around 1.2638 with a stop above 1.2660, based on what I see as improving fundamentals for the Singapore dollar vs. the US dollar, and on the fact that it’s up against 100 and 200 moving averages on the hourly, 4 hour, and daily charts, which should provide some solid resistance. So far it’s looking good – went up to resistance line at 1.2650, and as of this writing is back down around 1.2625 – Who knows? – this may be the trade that pulls us out of the fire. Just something you might want to take a look at, keep an eye on – perhaps analyzing it with the Winners Edge Double Trend Trap trading strategy here.

 

Okay, everyone enjoy the dawn of springtime, and hopefully I’ll come back next week with brighter news to report. Look at the bright side – I can’t possibly lose $200 in the next week – Uh, because I don’t have $200 in the account now. Hey, we’re still alive, right? All right, then there’s hope. Have a little faith, hang in there.

 

Jack

 

Jack Maverick is a writer and forex trader. Find him on Google+ at https://plus.google.com/u/0/103534926809963693894/?rel=author and check out his novel, the psychological thriller “A Cross of Hearts”, on Amazon at http://www.amazon.com/Cross-Hearts-J-B-Maverick-ebook/dp/B006GHJ0ZC/

 

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  • You’re too kind, Allison. A losing week I could bear (just barely), but a week like this is the kind of thing that’s difficult to shake off. Nonetheless, I will – looking forward to a new trading week.

  • Allison

    It wouldn’t be a fair try without a week of loss, right? When setting big goals it’s hard to remember this is a marathon, not a sprint…! We are all rooting for your success and frankly relieved to see you are human like the rest of us…Looking forward to that article on the psychology of the whole endeavor. It’s hard work!! Thanks so much for your insight and transparency!!

  • Just stay alive till you can catch one good trade – Usd/Sgd saved me from further calamity today when it kindly took a nose dive down from major resistance following the NFP report. Hopefully the value of the Singapore dollar vs. the US dollar will double or triple somehow over the weekend. 🙂

  • Delighted you made money – I may try that myself now.

  • Iron Maiden

    Great, article! I am rooting for you to succeed. I know you will because your ideas got me wins for my first week, thank you.