Welcome to my second post on this blog and my latest set of thoughts on the markets. I would like to talk briefly about psychology today as I have just been on the losing end of a sequence of trades which in hindsight, I should have been more careful with.
Allow me to paint you a picture:
It's Friday morning, and the Euro has regained some of its strength after the previous day's news story with the following headline:
Source: https://www.ft.com/content/a37743f2-4074-11e9-b896-fe36ec32aece
So, after this relative recovery in the Euro which is pictured below, and all the technical indicators suggesting that the Euro was over-valued, I entered into a short on the euro against the pound.
Following this decision, the Euro continued to become stronger, and instead of allowing the position to trigger my stop-loss, I revised my original placement of stop-loss, and the market continued higher, causing my losses to become increasingly large, as shown in the diagram above.
However, when my stop-loss was eventually triggered, I waited a while and then re-entered short again. Once more, I lost money.
Then a third time.
Loss.
So over the weekend I thought long and hard about why this happened, and the reason is that I was simply too encapsulated by an idea which I had considered to be good. I was not prepared to admit that I had made an error of judgement and consequently I lost.
Eventually, I even ignored all of the technical indicators under the certainty that they were wrong (for example, the oscillators had all moved from strong sell to strong buy since the time of my first short).
So the lesson has hopefully been learned. A small loss and an admission of error is much more important than my pride.
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