Let's talk about trading mistakes. We all make them. I've made so many that they qualify for a TV mini-series. Mistakes are inevitable, like Thanos. Quite often, it's not the mistakes that get us into trouble. (...it's not? woo-hoo...oh wait...you're making a point aren't you?...) It's how we handle the mistakes. This is magnified in trading, whether in stocks or forex, or baseball cards. The sad cycle goes something like this:
1) You take a trade you know you shouldn't take
2) You realize you're making a mistake as you're making it
3) You hope that somehow a miracle happens and you won't suffer any consequences
from your mistake
4) The mistake comes to its inevitable conclusion, playing out just the way you knew it
would from the beginning
5) You do something even worse to make up for the mistake, while at the same time you
vow to NEVER make that mistake again...all of which leads to...
6) See step 1
I've done step 5 many, many times, and rarely does it work out. But I have to ask myself...what is it I'm trying to accomplish? Am I simply trying to recoup the monetary losses? If so, that's OK, as long as I'm following the same set of rules I normally use. (wait...rules? hahahahahaha!!!)
Oh wait...that won't work because it would take too long and I need to undo this mistake quickly! In the end, the mess that comes from trying to "erase" a trading mistake isn't about the money. It's about the emotion surrounding the mistake. After taking a big loss - one that is 100% my fault - I want to have a big win that brings me back to the same balance I had before the mistake. That way I can pretend it never happened. I don't even have to write it down in my journal, because those two trades cancelled each other out, right? It would just be silly to write them down. Writing it down would make it real. And if I can counter-act the mistake with another mistake, yet one that gains back the money, it can be explained away somehow. (...oh, I can be VERY creative in my excuses!...)
"...the first step in managing a mistake is to make sure it doesn't get any worse. "
What I need to realize, what we (traders) all need to realize, is that our actions are written in stone. (...and they also need to be written in our journals!...) There's nothing we can do to erase them from existence. Once we commit that action, we have to accept that it really happened...that we really did that, and it's all on us. What does this look like in Forex? Simple...you get into a trade, and then some time later (usually very soon) you realize that you should never have entered that trade. You were tired, or emotional, or lazy, or anxious, or greedy, or afraid of missing out. Whatever the reason, you should never have entered the trade. Now what do you do? Do you hang on and hope that somehow it turns out OK? Do you say to yourself "Well, if it gets back to break even, I'll get out" (...which is just another way of trying to deny that it happened...). No. As soon as you come to your senses, you accept that it was a mistake, that it happened, that it was your fault, and that it can't be undone, only dealt with. And the first step in managing a mistake is to make sure it doesn't get any worse.
Maybe that's closing it immediately. Maybe that's putting the Stop Loss back where it belongs. Whatever needs to be done needs to happen NOW. Then, once it's handled, you can take a deep dive into your subconscious and see WHY it happened. (...when I first started trading, I had no idea just how much my emotions would be a factor...oh how innocent I was then!...) If you're afraid of spelunking into the depths of your own personal barrel of monkeys, reach out to us. That's what we're here for.
By the way, whilst our trading mistakes are set in stone, our spiritual ones are not, thank God. "Though your sins are as scarlet, They shall become as white as snow" Isaiah 1:18, NASB.
"If we confess our sins, He is faithful and righteous, so that He will forgive us our sins and cleanse us from all unrighteousness." 1 John 1:9, NASB.
Until next time...
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