9/25/14: The Slump Lives… How did we get here?

Well, I must admit, writing the blog post has made me feel better.  I’m determined to compete harder at work and I know I’m going to come out of this slump and become a highly profitable and disciplined trader.  Prior to today’s trading session, I spoke with one of the consultants at the institute today and that talk had me feeling positive also. 

So what about the slump?  Sadly, the slump is still going strong.  Two trades today, both big losers.  However, for the first time in I can’t even remember, I actually saw a decent sized positive in one of the trades with a +11.  I typically am happy to take 10’s when I see them, but because we are learning on the new Smart Money platform, I wanted to let it ride and see if it would hit the target, which was about 65 pips away (that would be a nice way to break out of a slump!).  Needless to say, the market turned the other way and I took a huge loss on the trade.  However, I am not upset by any  of this.  I’m learning a new system and learned valuable lessons about the value of good entry, taking profits when they are available, and managing risk with the new Smart Money system.  I’ve lotted way down, so despite being down over 45 pips today, the dollar loss was extremely minimal.

Today’s topic is more about what put me in this monster spin cycle.  I have identified a few pretty easy to see things that have put me in the spin cycle:

1.      Trading The Wrong Lot Size  Prior to the slump, I was trading reasonably well.  Not great, but winning on far more trades than I was losing.  I wasn’t positive on the pips, because I was taking some big negatives, but I told myself “OK, I get this now.  All I have to do is limit the losses to 10 pips and under and I’ll be well into the positive.”  So I abandoned my plan to slowly and steadily move up the lot ladder and skipped about 5 levels on the lot ladder.  BIG MISTAKE!  By the way, I have to say that Fx365i has warned against making this stupid move about a million times, but I was ready to start going up that lot ladder and I was going to hit it! 

So, how many positive trades did I do at the higher lot size before the slump started?  Ten? Five? Three?  Ha – TRY ZERO!!  I kid you not.  I went from winning 70% of the time to ice cold.  Traders Beware: it is a HUGE MISTAKE to lot up more quickly than you are ready for.  Please, I beg of you, trust me on this.  I spoke to another student today who did the same thing with the exact same results.  Actually this trader skipped about 10 levels on the lot ladder and lost money even faster than I did.  Save yourself hundreds of dollars by going slowly and steadily up the lot ladder.  As the school has said a thousand times, the Forex market isn’t going anywhere, so take your time… it’s in your best interests.

2.      Impatience and an Absolute Lack of Discipline  This is where it gets ugly.  I mean really ugly.  As anyone who has been at the institute knows, anything over 2 trades in a day probably means you are overtrading.  With very few exceptions, taking five trades in a day is pretty ridiculous and a recipe for a terrible day.  However, once I took a couple of quick losses at the higher lot size, what happened?  Read on for the horror….

SO, like I said, I had taken a few losses at the higher lot size.  I was frustrated, but still felt like my trading was going well and I just had a few trades go against me.  I was determined not to let that affect me.  Later that week, we had major news.  I was excited.  I have enough experience to where I know not to trade too early on high news.  I know it’s way too whippy and I have learned to stay out until the initial craziness is over.  I was ready for a HUGE day.  I couldn’t wait to write some monster numbers on the board for the class to see.

However, as LaCurtis has cautioned a gazillion times, there was a little voice on my shoulder said I better go get those pips back that I had lost earlier in the week.  So the news hits.  It starts whipping around like crazy and I stayed out for about all of about, oh… maybe 90 seconds.  Then someone inside my head (who I don’t recognize) said, “Screw it, I’m going for it.  I think I know what’s going to happen, maybe I’ll hit one out of the park.  Even if I don’t, it’s not biggie, I’ll wait for it to calm down and I’ll be able to recover.”  Well, of course, I got stopped out quickly on my first trade.  OK, so no biggie right?  Just wait for it to calm down and then take some smarter trades.

 

So what did I do? I said, “Well that was silly, I only ran a 12 pip stop on high news.  Let’s at least give ourselves a chance to get this one right.”  I moved my stop to 20 pips, waited for about 5 whole minutes this time, and blatantly and knowingly chased a trade.  You literally cannot be much more stupid.  Of course, the trade snapped hard against me and stopped me out within a matter of seconds.  Oh, about not being able to be much more stupid?  WRONG!  The horror is about to get serious.

Over the next few hours I took over 20 trades.  I’m literally ashamed to type it out even weeks later.  I won on a few and lost on more.  Most of the losses were bigger than the wins.  I left the school mad as hell at myself.  While driving to work, I continued to get into trade after trade.  Realize, these trades are being placed on my cell while driving in my car on the freeway.  Beyond the obvious terrible behavior of interacting with my phone that much on the freeway, do you really think I was clearly analyzing trade setups?  There are no indicators on the phone.  Oh, there’s also no stop loss on the phone, so I’m constantly watching the screen and clicking in and out of losing trade after losing trade.  Oh, by the way, I kept trading on my phone during my work day.  By the time the day was done, I had taken 30 trades.  30.  Freakin.  Trades. 

The good news was that there was more big news coming out the next day.  I of course gave myself a good talking to that night and told myself I was going to take it much easier and not make the same incredibly dumb mistakes.  I was right.  I ‘only’ took 20 trades that day. 

Since then, I calmed the trading way down.  No more double-digit trading days.  Well, there was one a couple of days later, but none in the last few weeks.  The most trades I’ve done in a day are 4 or 5.  Most days I’ve been doing anywhere from 0 – 2 trades.   However, the damage was already done.  My confidence was smashed to a pulp.  I had put myself so unbelievably out of sync with the market, I’m still trying to recover weeks later. 

I believe I’m going to pull out of it soon.  I’m practicing much better habits and have rededicated myself to learning my craft.  Fellow traders, especially those of you who trade with the institute: Don’t put yourself through this vicious cycle.  It’s painful and it’s expensive.  If you have taken more than a few losing trades, step away and pull a fellow trader aside.  If you’re an online trader, call your mentor, call LaCurtis, call someone who can help you step away from the screen and JUST STOP TRADING.  Believe me, if you don’t do it and you keep trading, you’re going to regret it and you will endure your own Horror.

3.      Although my astoundingly bad behavior from a few weeks ago was undoubtedly the crux of this mind-numbing slump, another contributing factor has also been the fact that I have been learning some brand new information.  In particular, the concept of average price and how it affects the market was recently unrolled to the student at Fx365i.  The concepts are great and our instructors have used the new concepts to pull a great many large positive trades.

However, just like lotting up too quickly and just like being far too impatient, I wanted to use this information too quickly.  As I was just starting to understand some of the basic concepts of average price and how the market reacts to these accumulation points, I tried to make them the backbone of my trading methodology.  Instead of using the information as clues to help with momentum trading on the Wealth Smart suite, I basically forgot all about all my principles on how to trade the Wealth Smart indicators.  This was yet another HUGE mistake.  My risk management and entry points went right out the window.  Not coincidentally, so did my positive trades. Fellow traders, when you learn something new, slowly incorporate it into your trading methodology, but remember that your basic principles must still be absolutely adhered to.  Fail to do so and you can forget about seeing positive trades.

4.      The last cause of this slump that I have identified is pride/ego and embarrassment.  I was too proud to go up to the board in class and write down my negative trades for everyone to see.  I let my ego stop me from walking up to my friend and lead instructor LaCurtis and say, “I need some help.  I’ve lost on 5 (7? 10? 12?) trades today.”  It took 3 weeks of losses before I finally blurted out in class, “I am the worst trader in the room.  I haven’t had a positive trade in weeks.”  I was so stupid, I even made sure my computer was on mute so no one would hear me clicking in and out of a trade every 5 minutes.

Fellow Fx365i traders, don’t do this to yourself.  The stress is puts on you is unbelievable.  The shame you feel is highly palpable and extremely powerful.  The toll on your trading account is significant.  You don’t have to let it get this bad.  If you are struggling, don’t be afraid to ask LaCurtis to analyze your trade.  Blurt something out in class.  If you’re not sure who to talk to and you feel like you’re starting to do something stupid, come and talk to me.  As you have read here, I have been there and done that.  As the famous saying around the institute goes… “Ask Me How I Know.”

Thanks to anyone who has read this.  I hope you found it helpful.  Hopefully you are saying to yourself, “Man, what an IDIOT!  I will NEVER EVER behave anything like that.”  Hopefully you are right and you never do these kinds of things.  However, please remember you can come to almost anyone at the institute from the instructors to the students if the need arises.

My next post will focus on some of the things I am doing to fight my way out of this hole I have dug myself into.  Thanks again for reading, see you next time!