I am thrilled to be able to say I was up 56.4 pips today (Thursday)! As someone who has struggled mightily with my trading, I now feel that I am starting to turn the corner and become a consistent, disciplined, and profitable trader. It feels GREAT to have made my goal for the week.
I took three trades today (Thursday morning New York session). All were to the short side. I took a +19.7, a +6.1, and a +30.6. I could talk for ages about all three of these trades, but this post will focus on the first trade of the morning.
I had tried to trade the Aussie session from around 6:30 – 9:00 on Wednesday night and it was flat as a table (by GBP/AUD standards). One of Wade’s great pieces of advice about the Smart Money Profile (SMP) software is to pay close attention to where the market is at in the volume curve. Usually the market is pretty wide awake during that Aussie session. However, while I was watching, the volume on the hour stayed almost exclusively dark blue…. ice cold. This really helped me stay out of the market. Sure there were some pips to be had as the market rolled back and forth in a 30 pip range, but I stayed true to my trading plan, exercised some discipline and stayed out of the market.
This morning I got online at around 5:05 am pacific time. The first thing out of my mouth was, “Ohhh Nooo!” Why? I saw the market had run up over 200 pips! I was ticked off. On Wednesday morning I had seen an excellent entry, but didn’t pull the trigger on a trade that would have paid at least 50 pips. On Wednesday evening, there was nothing to trade. Now I come in on Thursday morning and the market has already made it’s move? What??
I realized had a decision to make. Was I going to be an idiot and stay upset, or was I going to exhibit some emotional intelligence and get ready for the next move? Thankfully I chose the latter. I pulled out Wade’s awesome Trading Questions and started evaluating the market. Here’s what I noticed (see screen shot below):
So, other than sheer panic, why did I actually get out? Here’s what I was thinking in the moment. I knew that when the market makers tapped 1.8350, there was a chance the market could breathe back significantly. Knowing that the target for the trade was over 100 pips short from the start of the move, I felt there was a good chance the market might breathe back much more than 10 pips. I thought it very possibly could breathe all the way back to 1.8375.
Now, remember, my entry was 1.8380. If price did retrace back to 1.8375, there was a great chance it could stop me out and I really didn’t want to end up with a zero or 5 pips. Thanks to both Shane and Wade’s teachings, I am constantly asking myself, “At what price will I know that I was wrong about the trade?” In this situation, I would not have confirmation about being wrong until price would have gone north of the original average price of 1.8389. This means I would have been forced to have my stop up over 1.8390 in order to truly know that I was wrong about the move. There was no way I was willing to see a +30 in the trade and take a negative 10-15 pips.
So in my mind, it didn’t make sense to risk letting the trade back up to 1.8375 because I wouldn’t even know that I was wrong yet. I also wasn’t about to set my stop up over 1.8390 and take a big negative. As I look back now, this tells me that the best option for that trade would have been to take the 30 pips. Now, if I would have had truly pristine entry up around 1.8388, then I would have had the ability to let it breathe back to find out if I was wrong without taking more than a 5 pip negative.
I hope and expect it will soon be a common situation where I am up a significant amount of pips and then have to decide whether to stay in a trade or get out. Right now, it’s tough to imagine being up 20-40 pips and being OK with giving it all back. As such, I believe I may err on the side of caution and book those profits (hopefully without giving back 10+ like today). While I definitely want to pull bigger trades, I am also highly fearful of losing those pips because it is not yet commonplace for me to be up 30+ pips in a trade. As I gain more experience with SMP, I believe I will start encountering this situation more frequently. As such, I hope over time it will become easier to stay in the trade because I will have the confidence that I will be up 30 again soon.
Well, it sure is awesome to have made my goal, made 56 pips, AND learned a valuable lesson all in one morning session. What a great day! I’m planning to watch the market tomorrow, but I’m not pulling up my rate indicator. Heck, if I’m tired enough, I might just sleep in like a wild man until 6am (welcome to the west coast student trader’s lifestyle!). On a serious note, I hope your trading is going well. If you are struggling, please reach out to one of the instructors. These guys know their stuff, but they can only help you if you are open and honest with them. Also, please feel free to connect with me any time at firstname.lastname@example.org.
All the best!