Ya Gotta Take Yer Lumps! – EGM Trading Room

Learning to trade can be painful. Actually, there’s no “can be” about it. Learning IS painful. But that’s good because trading is painful sometimes. The nice thing about mentoring is learning how to think. I started out as a self-taught trader because I’ve always been able to learn things from books – including white-water kayaking. But until I got some professional mentoring, I could not be consistently profitable. When you trade with a successful (read “profitable”) trader, you learn things that can’t easily be taught in a book.

Last Night’s Catastrophe

Asia Session Crash of AUD/JPY on News

Asia Session Crash of AUD/JPY on News

Case in point: last night Casey held an Asia session trading room so some of our Aussie friends could participate (New York session is WAY late for “Ozzies”.) During the course of the session, Casey took a long trade on the AUD/JPY. But, unfortunately, it was just before a China news event that cause the AUD/JPY to drop like a rock. And I mean a really big rock that nothing could stop.

Hours of boredom pierced by moments of sheer panic

News, as you may know, can have various effects on the market – including none at all. There are news events that can be predicted to move the market quite a bit. As a former Asia session trading room moderator, news was our stock in trade. I liked to say the Asia session was “hours of boredom pierced by moments of sheer panic” because of the effect of news. But that was the only way to get the movement required to make profits. So we lived with it. But it appears the impact of Chinese news has increased in the years since I traded the Asia session regularly.

The Professional’s Response

In any case, we were able to witness a professional trader’s response to a catastrophic trading event. Casey was calm and analytical as he determined the best method to “wash” his trade (get out without a huge loss.) Sometimes the market cooperates. In this case it only slightly cooperated and then it didn’t. Early in the event he was able to fire a bullet or two (his Three Bullet strategy) and make some small gains on them. But during the course of the evening, the AUD/JPY crashed totally, causing Casey to have to take the “big hit”. Close all the positions negative at a huge loss.

Huge Losses Are Not Acceptable

As Casey said this morning, in the NY session, taking a huge loss is NEVER a good thing. Taking small losses is part of the job and a professional trader will take them and move along as if nothing happened. But this loss was monumental. His account dropped from $2300 to below $1400 and you could tell there was discouragement in his voice early this morning. Normally, a trader might want to take a day and do nothing after a big hit like this. And normally, so would Casey. But he came into the room to assure the group that life goes on and we have to move on – even from big losses. It’s never easy and I don’t mean to minimize it (I’ve taken some big whoppers in my time), but you have to erase it from your memory and keep trading. You can’t make it back by curling up and crying in the corner. Plus, his account is still up over 3000% in less than two months.

Psychological Recovery is Paramount

Casey (as with all pro traders that I’ve known) recovered in a few minutes of taking a new trade. He made a significant portion of his loss back this morning and this will just be an anecdote in a few weeks.

Thanks Casey for sharing your thought processes through this whole ordeal. It helps us to know how to think to be the profitable traders we want to be. And trading is about 90% psychology. That’s an official number, I declare it.

Ya gotta take yer lumps! Even the big ones!

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