Last night I almost went to bed defeated. Yesterday started off wonderfully trading wise. I woke up and found that my position long in the EUR/USD yielded a $5,000+ gain. For a $50,000 account, I thought that was pretty darn good. I took a look at the charts and sensed a pullback was inevitable. I didn't want to forfeit my 10% gain, so I sold all my shares and took the profit. For most of the day I avoided trading. Then some downtime in the nightime got the best of me, and I decided to apply my strategy to some short-term positions. What a mistake that was! Not only did I lose the $5,000 I had previously gained, but I also lost an addition $6,000.
I was all set to trot off to bed with my account sitting around $46,000 and no positions long or short for fear I would lose more. Then, I remembered Rule 1 (see Regrouping post): (1) Emotions, whether positive or negative, will be confined to the footnotes section of my trading story (i.e., although present and inevitable, they will not determine my trade actions). Combine that with my other rule, not giving up on a strategy until I make it work, and I had no excuse for not regrouping and reentering the game.
I switched out of the 1-minute chart and into the 1-day time frame. The trend was up. There was a green PSAR dot under the price. And the RSI was at 64, moving up, and had not diverged with the price. It wasn't a guarantee, but I felt good about going long.
I put in the order, had a great night's sleep--emotions in check--and woke up this morning to a wonderful sight: $9,000+ yield on my position. My account balance (equity) read $54,000.
Not wanting to repeat my previous day's mistake, I left my position alone throughout the day, with the exception of taking an $8,000+ profit around 1 pm. (I saw no reason to hold a position over the weekend.) Throughout the day I kept saying "no short-term trading." It wasn't an emotional decision. I merely wanted to reflect on why it was my strategy had been working great for me long-term but not short-term.
A bit about the strategy I employ: I'm trading on chart information--mostly because I want to. The idea of reading up on what's going on with the Euro, Greek bailout, strength of the dollar, etc does not appeal to me. I also think, as an emotional girl, it would be hard to squash my instinct to react to good/bad news and follow the emotional rollercoaster journalists unwittingly build for viewers. It's not always the case, but I assume that most charts, if set up with the right indicators, will contain some visual clues of a loss/gain of momentum before the price crashes/soars.
The indicators I use are: bollinger bands (default setting), RSI (default setting), and PSAR (default setting). When do I buy (or go long) a position? When the RSI is above 50 and moving upward AND there is a green PSAR dot under the priceline AND the price is hugging the upper bollinger band. It's not an exact science and I doubt any rock star chartologists are salivating at my technique, but for the past two days, on my long-term (i.e., overnight) positions, it's been working.
So what explanation is there for why long-term I'm kicking butt and short-term I'm getting my butt kicked? I'm really not sure. Perhaps it's that short-term trading requires more focus and attention on the price movements. And even with my rule about emotional detachment, I'm still susceptible to panicking when prices drop and feeling lucky and greedy when prices soar. At this point, it's probably a benefit to my bottom line that I'm stepping away from the computer after setting an order. One day, I hope to conquer the short-term trade. But for now, I'll stick with my long-term strategy and continue to analyze what's holding me back short-term.
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