The week is coming to an end and I am very unhappy at how badly I traded this week. The actual results are not that bad – down about -3% for the week, or -6.1% for the month so far – but the results do not reflect the poor trading. With good trading I should have been up $300k for the week, not down $9200! When every amateur trader is making pots of money on the Yen train I have lost money this week. I have been reviewing my trades and the lessons from them.
The first thing to note is that I moved house last week-end and it’s been a relatively messy week. I managed to get my internet connection up without a break, but the other family stuff has kept me busy and distracted. The desk / furniture is not setup properly yet. I have had very little sleep – between 2-4 hours most days. All this stuff messed up my focus. This is not an excuse, but something to be aware of. In future, if life gets busy, I must plan my trading schedule carefully, set aside clear, undisturbed times for it, and if it looks like life will be too hectic perhaps I might be better off not trading. Psychology is the most important aspect of trading – everything else follows from psychology.
The next lesson is that my system has come through resoundingly successful and once again I did badly because I over-ruled my system. I feared the FOMC induced craziness in the markets, and closed my positions too early. In fact, combined with the reduced focus I didn’t realise that even for the FOMC event risk I normally get out on the morning of the FOMC. This time I got out on Tuesday morning, and I don’t really know why. I wasn’t thinking clearly.
After this mistake, the resulting actions compounded the original sin. That’s what psychology does – it breeds uncertainty, second guessing, and breaking rules. I kept trying to short without waiting for a confirmed signal. I hesitated too long before jumping on the EURJPY train today, which is too late.
However, there are also strong positives from this week. I have not lost much, and recovered from my mistakes quickly for e.g. by closing my wrong trades and having the discipline to take my losses quickly. That’s been a big difficulty for me in the past, so it is heartening that I can handle taking my losses now.
Markets will get even more erratic for the next few weeks, but often they do have good 200+ pip runs if one has the guts to withstand the volatility. Reducing position size is a good way to deal with such markets.