Thursday, May 14, 2009

Taking The Punch

They say that to be a good boxer, you have to have the ability to take a good punch.

Read Full Post.....

I had just woken up to see that the Euro was on the upswing. The swing low during the overnight session was 1.3535, and in fact the Euro double bottomed at that price level. It looked like it wanted to challenge the overnight highs, so i got long @1.36.

No worries, the structure of the chart indicated that this was just a pull back. It was safely above VWAP, so I added to my position @1.3592 and again @1.3581. Then the test of my patience began.

I pre-calculated my breakeven point (91), and when I saw price recover to 1.3597, I thought well, good, just take out my worst entry (1.36), and I will be in a very comfortable position. Except that never happened. So I stubbornly held it while it drop back below my breakeven point.

Euro probed 1.3595, and when it failed to break above 1.36 again, I unloaded one position @1.3593. Then I sat and waited to salvage this trade. Then the triumvirate of fear, uncertainty, and doubt paid their visit yet again. Euro went sideways for a while, and as time wore on, I wanted more and more to get out of my position. As a result, I failed to observe that this sideways action stayed above 1.358 the whole time, and in fact there was a semblance of a mini-box pattern setting up. So when it broke out of the boxed range, I sold my remaining positions @1.3585 and @1.3594.
So, net profit out of the trade was around -$15. The frustrating part was that had I just stuck to my original plan of waiting for price action to take out my worst entry @1.36, I would have netted over +$200 profit. Instead, I had to eat a -$15 loss.

The only silver lining out of this fiasco was that I did not let my emotions go out of control. In the past, I probably would have went on tilt and try to revenge trade my way back to profit. Instead, I ate the frustration and loss, and stepped away from my station so that I can mentally recover from this trade.

In trading, like in boxing, success really comes from the ability to take these hits and recover.

No comments: