Over traded today and had a few losing trades. The first trade of the day was a short trade on the 2 minute chart on the FTSE, which was as follows:
The horizontal line was the neckline of an 'M' pattern which is a bearish pattern. I entered the second bull elephant bar that closed below this line on basis this was a confirmation. My stop loss was above the opening of the bar. Not enough wriggle room was provided for the trade and 10 minutes later and price action stopped me out for a loss of $40. I walked away and price followed through with what I had believed was going to happen.
However, I should never have taken this trade in the first place anyway because it violated my rule number one which is to only trade in direction of the trend on the weekly time frame which is bullish. Even if I hadn't of been stopped out and this was a winning trade I wouldn't really have won because I violated my rules.
The afternoon session was 4 trades on Microsoft on the 2 minute chart. A screenshot covering all 4 trades is as follows:
The highlighted green box is basically the Fab 4 zone. Pre market I had identified that price action was suggesting a strong open outside the box and that is exactly what happened.
Trade 1 was entered just at the end of the first candle, a large bullish bar but my rules are to put the stop loss under the candle. As this wouldn't give me the position size I wanted I skipped my rule and placed a more aggressive stop loss on entering the trade. Subsequently stopped out for a loss of $30. Deserved.
Trade 2 was entered when it appeared that price was reversing and I entered again, this time to see the trade go into profit. I didn't move my stop for the entire trading session and was eventually stopped out at the end for a loss of $30. Rules were followed so I was happy with that trade. Arguably if I entered trade 1 correctly I wouldn't have taken this trade.
Trade 3 was really just a trade about greed. I was just over break even on trade 2 and loaded up with another 50 shares on the formation of a hammer candle. This would have potentially been a good double bottom to have traded if I wasn't already in a trade. This subsequently went on to stop me out for a loss of $50. I was increasing my risk here outside of my rules on the 2 minute chart.
Trade 4 was pure revenge trading. This loss of $45 was again deserved.
The biggest lesson learned was that by not having stuck to rules I ended up having taken a number of other useless trades that I probably wouldn't have if I had executed trade 1 correctly. Making stupid trades puts strain on your pyschological state of mind from a trading perspective. Consequences now require me to pay to charity the losses of the day purely from incorrect trades.
Trade Clearly!
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