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A loosing trade
By Laetitia Vaval | December 10, 2007
In my past entry, I wrote about a poor trade I entered about a week ago. I purchased 3 lots of EURUSD at about 1.4920, expecting to climb all the way to 1.50. Instead, the Euro retraced back down. I kept my trade open for a few days expecting it to rally back, but instead the Euro traded lower day after day and I decided to close my position at 1.4750. As I wrote previously this was a very poor trade for many reasons. I risked way too much money, just to potentially capture a small profit (about 3 x 80 pips). After closing that trade – which resulted in a 500 pip loss, I was a little upset at mysefl. I looked back at the trade more closely, and it became very apparant that I had completely ignored the 1:2 risk/reward ratio. I had risked (and actually lost) A LOT more that what I could have realistically/potentially made.
This was my first “real-money” loss and I felt a bit discouraged. I feared that any trade I would enter would result in further losses and that it would be impossible to make back the money I had just lost. I decided to take some time off from trading – to clear my mind in a certain way. As a result I didn’t trade at all last week. I did stay informed on the latest FX news and observed what was happening but did not get involved.
Now that a new week has begun I am ready to actually trade. I’m about 500 pips down from the original balance on my account and I fully intend on regaining everything that I’ve lost and go back to a positive balance. One good trade at a time.
Tomorrow will most likely be an interesting trading day as the Fed will announce whether it will or will not cut interest rates and if yes, by how much. The most likely outcome is a 25bps cut, but if the Fed decides to either cut by 50bps or leave rates unchanged, the markets will react strongly and might offer some very good trading opportunities.
noneTopics: What To Look At In The Market | 3 Comments »
December 11th, 2007 at 3:50 am
I have read the whole article, most of them are useful but I don’t agree some of your point. maybe we can communicate more.
December 11th, 2007 at 5:31 am
Thanks for your post. I definitely agree with you, on making a bad lose – the best thing is to have some time out from trading. It’s all to easily to act irrationally and force trades when a person is annoyed with themselves. I stick with 2:1 or 3:1 on trades. Overall I think patience has to be the best quality to have when recuperating from a lose.
December 11th, 2007 at 7:23 pm
Turned out to be a kind of wild day today, eh? I stay well away from such market-moving announcements myself, but I’m curious what your rules are.