17th April 2012 - loss on GBPCAD

I'm about three months into my trading journal, and I've run into what feels like a horror streak of losses. My last six orders have all ended as losers. This is when traders are psychologically tested, and I can definitely feel it. 

First, I'll briefly discuss my last trade.

GBPCAD

A strong bearish engulfing bar formed off resistance late last week. I decided to trade it. Because of its strong bearish momentum, I decided to split my trade into two shorts, with TP#1 at support level #2 and TP#2 at support level #3. I suppose this seemed quite greedy, but the size of the engulfing bar gave me confidence.

Price did move my way for a bit, but then bounced off support level #1 with a BULLISH engulfing bar. As soon as the bullish candle closed, I closed both orders. I had that gut feeling, hope, that price would return downwards. It was the same feeling I had in one of my recent losses. But I saw no technical signs suggesting a return to a bearish trend. Following the Zurich axiom, if all you have is hope, you should jump. That is precisely what I did. 

Right move? I think so. The bullish engulfing bar is a long signal and can be traded in itself. Remaining short against a bullish engulfing bar seems irrational. Not only would I have to beat newfound bullish momentum, I will also have to try breaking support level #1 again. Probability-wise, I think I made the correct move.

Lesson: Respect first support/resistance areas. Set possible TP here.

Handling losses

I felt quite emotional this morning as I got out of the trade. Somewhat frustrated, especially in the face of consecutive losses. I was acutely aware of the possibility of trading "out of control" and so I've sworn to trade in single micro-lots (smallest size possible) until the end of April. I will still be trading and logging my results, but I won't be making much money (or losing much either!).

Discipline is key.