Spot the Mistake(s)

[barjon]

Dithering Dave was trading off the 5 minute and had watched the price move up and then go sideways in a fairly narrow 15 point range for half an hour. He decided he would trade a break out from the range.

When the price took a peep above the top of the range Dave entered long. Unusually for Dave the price moved in his favour straight away and inched up without any great enthusiasm until he was 15 to the good 20 minutes later. Dave moved his stop to break even.

As the very next bar ticked up the price started to fall - fast - and was down 11 after the first minute. "Crumbs" said Dave "Maybe I moved my stop too early, I think I'll put it back to the original one." So, he removed his stop but, before he could re-instate the original one, the price had shot past it by a couple of points where it paused. "Damn" said Dave "It seems to have stopped and I'll get out if it goes back up to my original stop level."

The price did bounce and moved up to and then a couple of points past that original stop level. "I'll just wait and see a bit now, it may keep going" said Dave. No such luck, down it went again until it reached the point where the previous fall had stopped. "Seems to be some support here" said Dave "But I will get out if it bounces this time". Well the price did bounce again to reach that getting out point but Dave didn't pull the trigger and down it went again at an ever increasing pace until Dave was suddenly 20 points underwater with still no stop in place with the price below the low of the earlier identified range.

"Heaven to Betsy" cursed Dave "I was 15 points to the good on this trade and now look at it. Might as well hang on now, I reckon it should bounce again". It didn't and Dave eventually threw in the towel with a 45 point loss.

jon

 

[£10kLoser]

Non of us have ever done anything like that...

 

[0007]

It's just one of those things you read about .................. (I wish !)

 

[options]

Love the swear words.

But back to the story... What's the point and more importantly what's the solution?

(Actually I know what the point is... This has happened to every single trader on this earth, unless of course he (she) has been force fed how to trade by the institutions). And more importantly has to trade a certain way.

 

[montpro]

Have you been watching me barjon?

 

[Splitlink]

Have you been watching me barjon?

Jon's a mod. He watches everybody. :clap:

 

[barjon]

Yeah, we've all done it, but kicked the habit after a bit I hope :cheesy:.

Apart from all the obvious mistakes and some less obvious ones, the main point I was trying to make is that Dave based his trade on the price action with only a subsidiary focus on his account (via his position size and stop loss risk limitation) and then increasingly switched until he was focussed exclusively on his account to the extent of ignoring what the price action was telling him.

It's a fault that maybe explains why many can "trade" successfully on paper only to fail when they put real money on the table.

The solution? Well, it seems to me that people who trade from price action spend a lot of time detailing the action that will give them an entry with little more than a stop loss and a hazy target in mind for their exit. I would have thought that a good trading plan should have at least as much detail (maybe much more) describing the price action which will signal an exit and which will trigger wherever and whenever it occurs regardless of what that means for their trading account. Then it's just the usual "trade the plan".

good trading

jon

 

[normbeef]

Just set it up and walk away... I like to practice on my golf swing when my trades are working... you shouldnt distract them from their job or they will blame you for getting it wrong... lol

 

[alan5616]

His other mistake of course was trading off a 5 min chart - these moves up and down are really just noise.

GJ. It's not a mistake to trade off a 5 min chart, if you're scalping for a few points. I, personally, would never trade off a 5 min chart in the Forex markets but, consistently trade the FTSE and Dow using this tf.

IMHO, the problem arises when traders place a lot of reliance on tech indicators when using the 5 min chart. In the shorter tfs, price action and momentum is more important. The key element, as with all trading, is to maintain tight control of risk management. Set your stop and stick to it. Don't be afraid of taking a losing trade; there will be plenty of profitable opportunities to compensate for the one that went the wrong way. The hardest part of trading is to accept that you got it wrong. Just my two pence worth.

 

[0007]

Don't be afraid of taking a losing trade; there will be plenty of profitable opportunities to compensate for the one that went the wrong way. The hardest part of trading is to accept that you got it wrong. Just my two pence worth.

True. Get out as soon as you know it's wrong - but you do have to admit to yourself that it was wrong and as you say, that's not easy - especially to anyone who's been successful in life until they started trading ...........