My Balls Grew Bigger This Week

[WARNING: this post has more words than all my previous posts combined]

Apologies for the crude title but I need to record and document a personal victory; not in the markets (yes, I did well) but over my own psychology. Normally I’m a daytrading type of guy with smaller stops and modest targets. But I’ve just completed a trade where I made a trading plan on a much larger scale than usual, ie instead of a 20pip stop I had a 100pip stop and instead of a 80pip target I was looking for a 300+pip move. The trade was on EUR/USD and was based on the following chart.

My first short entry was 1.3775 with a 100pip stop which was well above the current weekly high, and an initial target of 1.3475. It was half of what would normally be a maximum position size. At first the trade didn’t do much but then it turned against me during the Berlusconi bounce. It was difficult to watch the trade going the wrong way. But something kept telling me to stick to the plan. When the trade was 50pips under at 1.3827 I added another (quarter) position and at 1.3837 I added yet another to complete the trade size. All my stops were at 1.3875. With that dreaded feeling I watched it slowly climb further, getting closer to my stop.

There I was, thinking how my analysis was very good and that the probability of success was high. But momentum was against me and the trade inched ever closer to my failure point. It got to within 15pips of my stops and then excruciatingly and slowly it backed away and gave me room to breath. So do I use that opportunity to take a smaller than planned loss or do I stick to the plan?

The analysis was there, the plan was there. The risk was acceptable, the potential reward – champagne for a beer drinker . So when minor intraday supports started to get taken out it was game on. And I held on. With all my might. Before I knew it my last entry closed out for +200. Wow! I moved my stops on the remainder and went to bed during Wall St session happy but with a lot of pips on the table to ensure a sleepless night. But I slept well. I woke up 6 hours later with even more pips on the table – a different kind of morning glory.

EUR/USD had now completed 75% of its average weekly range and judging by sentiment and price action of the day’s sessions I felt that more falls were imminent. I recall a quote by a veteran trader (can’t remember his name) that “to make the most from the market you have to give some back to the market.” I knew what that meant and I also remember another quote, “You can only make as much as the market will give you. If you try for more you’re finished.”

So some sense and balance was required. A 100% weekly range was completed on four of the previous four occasions of this trade set-up. I was +300 and probability was telling me there’d be at least another 100pips. The news was all (favourably) bad. Italy was for all intents and purposes gone. I had to stay in the trade. There was real potential for an enormous Kerplunk. A (manual) trailing profit stop was required where I’d take more if the market was going to give more, but for that privilege I had to risk giving some back. The trailing stop would have to be wide enough to absorb any volatility but not too big where I’d give back too much. These were tough questions for me as it was not my usual pip gathering method.

So I held. When it broke through 1.35 to a new low of 1.3485 I moved my stop to 1.3585 which was 100pips above the new low.  86% of average weekly range had been completed now. More was possible but in no way guaranteed. But you gotta be in it to win it.

So I held. It broke back up. I held. And so it hit my manual trailing stop and gave me about a +250 pip average trade across my positions. The market wasn’t going to give me more but I had given it every chance. I had a parallel trade on AUD/USD netting a similar amount. It was a very good week.

And now my balls are bigger to do it all again. 🙂

(I did attempt new shorts late during the European session Friday at 1.3680 but resistance got taken out with ease meaning a small amount was given back but that’s trading.)

10c

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