Saturday, July 25, 2009

07/25 Anatomy of a Recovery

Let me start by saying this was a very rough week! I took a lot more losses on the first part of the week than I wanted, that being said, I'm happy to report I was able to turn around and come back to finish slightly positive!

It takes a lot of effort not to let a string of losing trades spiral out of control, it takes more effort to not let a string of negative days to turn into a negative week. For me, I had to look at myself first, then review my trades and finally make the turn. So, I decided to write this and outline what I did.

First I had to look at myself. Was I trading on my best mood? Best focus? NO, once I realized, I then took a look at what I could do to fix it, like any machine operating under stress, it usually breaks down. This is my case with my own body. I was having a hard time sleeping and was not doing any form of excercise, not to mention eating a lot of white bread. So, I fixed all 3 items on Wednesday: I went running on the beach early in the morning, that gave me energy and focus for the trading day, I fixed my breakfast to remove the white bread and replaced with an Acai shake with banana and oatmeal, I also started reading at night instead of watching TV. That took care of the body.

Also Wednesday, around 8 PM, I was still very focused and took a look at my trades. I realized my failing trades were break-out trades from the top or bottom of channels, then I looked at the market and realized we were in a very tight channel and I should be extra careful not to sell at the bottom nor buy at the top (see posting). This was most important for the turn-around, but it would never come to me if I hadn't "observed" my own self first.

Last, but not least, another key component is the fact that I'm trading with a decent risk to reward ratio. By keeping a 1 to 1 risk to reward (see posting), I ensure that I'm able to be profitable even if my win-ratio is slightly over 50%. If I was trading with a non-favorable risk to reward ratio, a string of losses would be enough to put me back in the red for quite a while.

All that being said, I hope this helps me in future similar situations. Also hope it helps others if they find themselves going through a rough trading time.


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