Account balance: $76,045.72.
I should be jumping up and down, but for some reason the $16,000+ gain from my overnight position going short feels more like a win from pure luck than actual trading skill.
I woke up this morning feeling good. We're in the middle of warm weather streak out here in Northern California, I am receiving steady work from my employers after a stressful dry spell, and I'm close to signing a lease on a cheaper apartment. All signs pointed to "good to go."
Then, I thought of my FXCM demo account. I knew I had kept an overnight position, and even though I was confident with the move at the time I placed it, I couldn't shake the feeling that something in the European and U.S. markets would work against me.
I shuffled out of my bed, got some breakfast and tea, and eventually mustered up the nerve to turn on my laptop and log in to my demo account.
I was prepared to see my previous $60,000+ account severred to somewhere in the $40,000-$50,000 range.
So many factors led me to believe this would happen. Chief among them were that I forgot to put my parachutes in place and that I had jumped the gun on my entry point. I usually wait until there is a peak and lower dip below the RSI 50 line. Instead, I placed the order when the RSI value crossed the 50 line. It would have been completely feasible for the price to rebound back up and take the RSI value back above 50. And even though the price pierced the lower Bollinger Band, the Bollinger Bands themselves were not channeling downward. They were still very much horizontal.
For some reason though, none of this persuaded me against putting in the trade. I switched to the 8-hour chart and looked for signs that might indicate a strong move up or down. It wasn't giving me anything definitive, so I moved on to the day time frame. Same deal there. The week time frame is what convinced me to eventually put in the sell order. There was a strong blue candlestick placed right smack in the middle of the last upper PSAR dot, then an equally strong red candlestick. The third candlestick, representing this week, didn't show any signs of redness. The Bollinger Bands were still very much channeling downward. The whole three-candlestick setup looked identical in nature to its previous rebound in the last weeks of October 2011. No RSI divergence had occurred, so I thought the odds were that the price would go down a little bit more.
I was straying from my strategy. I was taking a risk. And it paid off.
Looking forward to next week, I anticipate some more movement down in the price and will probably sell more than I buy.
Although I found evidence in favor of going short, the one thing I need to consider is the possibility that I was actively seeking evidence in favor of going short. There very well good have been evidence in favor of a long position or evidence of staying neutral and out of the game for the day.
I'm often in the habit of believing what I want to believe, and this trait could very well get me in trouble in the future.
My goals for next week will be (1) to finally use parachutes (it's really inescusable at this point that I'm not) and (2) to take up the opposite position before decided to execute a trade.
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