Temporary Trading Insanity

First of all, I previously stated that I'd post about my "crazy impulse trading" that I did yesterday morning. Unfortunately, the past 2 days have been too hectic for me to post and by now, I'll just summarize the situation. I started trading, took a couple of small losses and then I upped my trading size trying to make up my losses, which created a bigger loss because I got spooked when my position went against me just a little...something that would not have shaken me if I had been trading a proper size. One thing led to another and I had traded both sides of the same market at a loss! That alone is insanity. Anyways, I finally realized what I was doing and I forced myself to close out my open positions and even exit the trading account and spend a half hour away from trading.

Once I cleared my head, I could objectively formulate an opinion on the market and that allowed me to put on a couple of trades that made up for the losses and then some. It's nice to have a small reminder that, as traders, we are very vulnerable to self destruction. Although I didn't self destruct...not even close due to risk management rules I follow...my actions were very similar to what occurs when a trader is about to blow up their trading account.

Morals to take from the short story:

• Don't over trade
• Don't up position size when losing
• Tap into your internal objective observer (easier said than done) and recognize when you need to take a break
• Risk control measures are very important...probably even more important than most of us can comprehend
  

There you have it, hopefully this will serve as reminder to others in the same way it worked for me.

Tomorrow I will have a good post on how to trade economic news releases in the forex market...a setup that helped me trade the unemployment rate announcement this morning.

Good luck out there.

TLT