I have read somewhere that how good a trader you are is a function of how many mistakes you make. The Master Trader makes very few mistakes, that’s why he’s a Master!
Today I made a mistake, and I thought I’d write about it here because it is really what I have learned through the Master Key Experience that has enabled me to clearly identify the underlying cause of this particular mistake.
Initially, I made a lot of mistakes, as I guess most people do when they start out in any endeavour. With time, I’ve been able to learn from my mistakes and as a result, I’ve been able to prevent myself from repeating them. I’ve found that I learn best from my mistakes when I really take the time to write down an analysis of the mistake; what exactly happened; what caused it; what can I do to prevent it happening again?
Yes, you probably guessed it – the problem, the underlying cause, was my thinking!
I came into today (Feb 3rd) having a short bias on the EURAUD, so I was looking for a signal to go short. That means, I was expecting the AUD to appreciate relative to EUR.
The signal came just before 9AM where a big black bar formed. I went short at the close of the black bar with my initial stop beyond the top of the previous bar (top red line). The initial stop is where I will exit the trade with a (small) loss if my idea turns out to be wrong.
Here is the mistake: I almost immediately moved my stop down to where the lower red line is. This behavior is not a part of my system, and so it is a mistake.
What caused the mistake?
Now why would I move my stop? The stop determines how much I am going to lose if I’m wrong. If I move the stop closer, I lose less money if I am wrong. But I also increase my risk of getting taken out without reason, just from the random fluctuations of the markets. Which is exactly what happened. And after taking me out, the move that I had anticipated actually happened.
I was right, but I lost.
And I see clearly now my mistake: I was thinking “I’ll lower my stop, so that when I’m proved wrong, I won’t lose that much…” In other words, I was thinking that this trade would not work out, and I took the exact steps to make sure that it did in fact not work out!
So, I got to be right about being wrong. But I still lost.
I actually love this about the markets. There is really no better way to expose the old blueprint and all it’s crazy ideas and addictions! Most people believe that trading the markets is like a battle against a lot of other traders. But it’s not. Trading the markets is your own battle with yourself – nothing more, nothing less.
What can I do about it?
How can I prevent mistakes like this to happen in the future? Short answer: Improve my thinking! And I do that by staying faithful to the new thinking patterns I am installing in my subconscious. I do it by reminding myself again and again what my trading rules are (repetition anyone?!). I do it by constantly seeing myself as the Master Trader I intend to become. By getting in touch with and staying connected to that future me, that Master that I address every night in the mirror!
I know I can do this. One step at a time, with practice to perfection!