Nelson Mandela once said “I never lose. I either win or learn”. When it comes to losses in trading, turn the trade you didn’t win into a trade you learn from. Admit and learn from your trading mistakes then trade again.
Every new trading position opened differs from the last trade closed. This applies to any trade including those trades of the same stock or currency pair. The following trade on GBPNZD shows how a mistake made resulting in a loss, didn’t stop me from taking another trade later on the same day when I saw another trading opportunity.
Figure 1
On the GBPNZD Daily chart, Figure 1, price was starting to move downwards. Compression of the red long-term GMMA lines indicated a weakness in the support of the previous uptrend when the blue lines were above the red lines. The blue lines of the short-term GMMA had turned over and were passing through the red lines of the long-term GMMA. Price was expected to continue downwards.
Figure 2
On the GBPNZD 1 hour chart, Figure 2, price had retraced up into the long-term GMMA lines. Expecting price to bounce off and resume the downtrend I opened a short trade as marked by ‘1’ with an entry price of 1.9033, a stop loss as marked by the Traders ATR line at 1.9072 and a target profit of 1.8884. The target profit was calculated by taking 75% of the Average Daily Range and subtracting this figure from the open price of the day.
Figure 3
I normally avoid trading through major news announcements and was aware of Governor Orr from the Reserve Bank of New Zealand speaking at a certain time. About half an hour had passed from the scheduled time and there was no price reaction on the chart from the news flagged as red. Thinking the volatility period was over, I opened my short position. Not long after it was opened, a large spike up in price appeared and I was stopped out of my trade. Obviously, Governor Orr was speaking now. This was my mistake.
Figure 4
A few hours later I looked at the GBPNZD 1 hour chart again and saw an opportunity confirmed by price action. On the GBPNZD 1 hour chart, Figure 4, price had made a 3 drive pattern to the purple trendline. A short trade entry opportunity appeared when price did a break, back and retest of the orange inner trendline.
Figure 5
Trade number 2 is shown on the GBPNZD 1 hour chart, Figure 5, as marked. A short trade was opened at an entry price of 1.9008, a stop loss as marked by the Traders ATR line at 1.9066 and a target profit of 1.8884. The target profit was calculated by taking 75% of the Average Daily Range and subtracting this figure from the open price of the day. Price moved downwards and I closed my trade at 1.8954 as marked by the star. A profit of 54 pips.
Two trades. One was a win and one was not simply a loss, it was a lesson learned. Next time I will give Governor Orr more time to speak.