The Background:
This week turned out to be one of those invaluable learning experiences. Remember the previous week? It had ended in a bad note where I lost close to 3K in the last day of the week. So when trading started for this week, I was all about going and making a few trades and making back the money I lost at the end of last week. I had set myself mental targets of recouping the 3K loss and making another 3K extra for this week.
The Losing Streak:
Now when you start trading with a mindset like that, I soon realized it just leads to more losses. The first couple of trades this week were good trades, where I followed the setup correctly but still made a loss. Among the main reason was the fact that almost ever pair gaped big time on open on this week due to the comments passed at the G7 meeting. This fired off various entry signals in my indicators, and I entered the trades. I soon realized that when a pair gaps on open so big, the indicators do not generate valid signals. In fact they were in a totally messed up state.
By now, I had added to my losses form previous week, and I felt I had to now make up the extra loss too. SO now I started entering trades where the setups did not always generate valid signals and where all the rules were not followed. I could not get any signals in the higher time frames (1 hour and above), so I started looking for trades in 15 and 30 minute chart. The problem with that is in lower time frames, the signals are very unreliable. The tend to be very choppy and more often than not, I got stopped out of my trade.
The Aha.. Moment:
By Tuesday, I realized what my problem was. I was just over trading. And the more losses I had, the more I traded trying to recover my losses. Which in turn led to more losses. I was in a terrible losing spree, and just 2 days into this week, I was down a further 2K in equity. And I was entering so many trades every day that I still have a backlog of trade updates I have to write for my journal.
The Turnaround:
So from Tuesday on, I decided to stop worrying about the losses and start with a clean slate. I decided I will not over trade, and I will not trade from charts lower than 1 hour. I will also enter trades only when the setup clearly says so. This had such a magical effect in my results. To put that into perspective, in the first 2 days, I made 19 trades of which 12 were losing ones. Over the next four days, I made a total of 25 trades with just 7 losing ones.
Finish Off With a Cuban Cigar:
And Friday was the perfect way to end the week. After a good run up on the Yen and CHF pairs, they were starting a pullback. I caught these pull back right in time using the OzFX setup on 1 hour charts. And everyone of the trades I entered was a perfect. Its not often when you get a situation like this when 7-8 currency pairs show the exact same chart setups and move identically. You got to make use of these situations. And just like that, my account was back to its highest levels since before end of last week.
Lesson: Draw downs are inevitable. Do not try to over trade to recover the losses. Stick to the plan and trust in the setups to get you into good trades.
As always, its not time for the details trades and results for this week. You can it in the link here.
