User Case Study: Suffering Big Losses!

15,000 is the biggest in a day by far to have ever happened, and it happened right as I was not paying attention.
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Hello, everybody. I was doing really quite well, during the end of 2019. In about two months time, I managed to get about 40% on my account. Then during December, I took a couple weeks off just for the holidays. When I came back, I was really quite ambitious.

So, I started training I went… If you remember I started November, October, I think it was with about $500, which I then grew to about $700. And then in January, I started like say, starting over with $6,000, which is 12 times more what I was trading in the beginning, and let’s just say the mental shock of that was too much. And I was worrying so much about generating returns that I wasn’t thinking so clearly. And I was worrying so much that I fell into the trading psychology trap. Essentially having a solid trade setup, the price moves against you a little bit, you cut it short even though all the logic behind it is correct.

Adding to a losing position because you’re just kind of hoping that the market will turn around in your favor. And after a couple of losses, just changing your position size, pumping up the leverage, trying to crawl back out of the hole which essentially, if you’re in that mindset, it only digs the hole deeper.

So after a very stressful and very, let’s say unhappy January, my returns on that portfolio look mixed. Towards the end is where it got really bad.

So anyways, what I did is I took the money out, took a deep breath, I decided to take about a week just to watch pretty much every single video and resource that I could find online on trading psychology. Essentially take it as a hit but as a lesson.

After stabilizing and educating myself, I came back and I started again with a smaller account, bigger than before but not as ambitious as in January. I started again with $1,000.

It is the end of my first week trading with this new capital. I’m wearing red as you can see, because I’m celebrating Valentine’s Day, and I’m closing the week with a profit of about 4.5% which looked like this. Let me walk you through it.

Starting Monday, it was a relatively quiet day. I held a Pound US dollar long for a couple of hours but essentially, it didn’t really go anywhere so, I decided better to just close it.

Tuesday was a good day because Monday, the Coronavirus reported a smaller number than what had been reported before. Essentially, this indicates that the coronavirus was, let’s say reaching its peak because every day less, less and less reports.

This resulted in a very risk positive market for pretty much all of the Tuesday session. Risk positive setting is very good for trading the Australian dollar against the Yen, because the Australian dollar is a high beta currency, and the Yen is a safe haven.

So, going long on the Australian dollar versus the Yen during a risk on sentiment.

It’s a pretty clear trade as long as nothing happens to change the risk sentiment, which means you do have to stay on top of it, paying attention to what’s happening in the markets, you can’t really leave, right?

On Tuesday evening, we had what was easily the biggest and easiest, and clearest trade of the whole week. The interest rate decision and statement coming from the RBNZ. Now, in the currency research tab of the terminal, it was listed as the week’s top trading opportunity.

So, going in there, we managed to know exactly what to look for, what kind of things to expect, in order to know which trades to place. What we were looking for in the statement of the bank is for them to either downplay their positive economic indicators or the opposite, which would be to say that we are positive and the Coronavirus is probably not a big deal. And what we got was them being very positive. And here’s a video of that trade, specifically as it happened and how I took it using the squawk setting on the Financial Source Terminal.

  • [Bank Instructor] So unchanged as RBNZ keeps the official cash rate unchanged as expected. RBNZ says employment is as or slightly above its maximum sustainable level. It says over impact of Coronavirus on New Zealand will be of a short duration. In terms of the full concept, they have revised it to the upside.

That particular trade was great because it resulted in this about 2% jump.

Now, Wednesday we had in the morning for me some data coming out of the US which was probably going to be the highest conviction trade opportunity for the day. Which was the CPI data as well as the employment reports. But, it was relatively mixed report.

There wasn’t any clear trading opportunity and the market really didn’t react to this. So, I didn’t place a trade. Sometimes, simply staying out can be much more profitable than just trading because you want to place a trade. Now following the rather unimpressive CPI and jobs numbers from the US on Wednesday morning, the rest of the day had a similar theme of risk on so again, I had placed several long positions in the Australian dollar against the Yen, which is my go to for risk sentiment, and managed to make some small profits during the day.

Then towards the end of the afternoon, I just put some tight stops and limits on my trades that I had placed because of course, anything can happen with risk sentiment while you’re not watching.

So, I went and I was playing tennis and suddenly my phone starts getting notifications. So I go check and it says that all of my stops had been hit. So, of course I assume something must have happened. I go into my phone, about 15,000 new cases of Coronavirus reported when it had been going in a downtrend and was at about 2,000 per day.

15,000 is the biggest in a day by far to have ever happened, and it happened right as I was not paying attention.

You see, there’s this huge candle going down, down, down, down. And suddenly I got a notification of another by order that I had forgotten to delete before leaving the office. So, of course, this is very bad. It activated by order which was completely against the sentiment, and very quickly that went down to the stop loss.

So essentially, pretty big hit, which was unexpected, and it was dump. And it was my fault for not having deleted my pending order, which was risk dependent, while I was not here paying attention to what was happening to the market. And as you can see, that particular event took us from up here, to down here in five minutes. So, that was a mistake on my part and something that I will not do again in the future.

Always remember to close your pending orders kids because they can and probably will screw you over. As a thought experiment, this is what my weekly result looks like right now, but this is what it would have looked like, had I not made that mistake. Not great, not terrible, definitely could have done better.

Then on Thursday, the risk off tone continued and I just placed a couple trades just shorting the Australian dollar in favor of the Yen. Again, shorting the high beta currency in favor of the safe haven.

Basically just on the pullbacks making a couple of profits, as you can see right here.

Finally, that brings us to Friday. Today in the morning, we had the retail sales coming from the US, which was pretty much exactly as the market expected. So, not a real trading opportunity there.

Anyways, I’m happy to be back. Thank you for watching. Again, if you have any questions, comments, leave comments down below. I’ll be sure to get back to them. And I will see you again.

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