Confessions of A Forex Trader
Greed
I got greedy last week. I admit it. But I didn’t start the week like that. Quite contrary, I approached the markets very humbly having wrongly made a bear call on the GBP/USD last week. But even in analyzing a bear case, I rightly saw the clear signals of the beginning of bull run that took price above 1.5250.
Moral of the story: Plan your trade.
Once the price break above 1.5250 happened, I traded the new trend that took price from 1.4946 to 1.5070 with very shallow retracements. I set targets very tentatively at all the resistance levels (1.5320, 1.5460, 1.55). A trade that developed the course of the week was increasingly profitable. Sounds good so far.
Moral of the story: Trade your plan.
But my ego allowed pips to blind me to the fact that I didn’t have a solid action plan for 1.55. I expected 1.55 would be met with resistance but failed to establish what I should actually do if I was still in a trade because my target was not achieved in addition to what I would do if my target was achieved. I needed to not only pay attention to that level but I needed to exit my trades after the first attempt at that level took prices below 1.5400.
Instead, greed told me that this was only a first failed attempt that would surely end with another successful assault at 1.55. This had been a strong rally all week, after all. Do you hear the insane sanity? Rational thought should have led to the conclusion that it had been a solid run all week and that 1.55 is a major half point level that would be met with resistance. And with resistance would come a correction so rather than looking for more longs, I should have exited my longs and looked where I could reset longs or go short for the correction. In addition, I set my limit too aggressively at 1.55 so my limit was missed by 30 pips.
My greed caused me to add to the trade rather than exit it. Now instead of sitting on a mountain of pips, I am having to manage now a loosing position.
Moral of the story: Don’t add to a position. Rather, build a position for a trade and manage that position until the trade is completed.
Please note that these rules and morals are specifically geared toward me and my performance last week. Please do trade what you see.
