You know that feeling when you jump in a lake without testing its temperature first? This forex trade gave me the wake-up call I needed. Brrr!!!
It’s been a while since I actually put on a trade, so I shouldn’t be surprised that I committed some basic trading mistakes that I could have avoided if I was more active in the markets.
As I mentioned last week, I bought USD/JPY almost right after the PBoC downgraded the yuan for the second time. I thought the pair’s move was temporary and that the rate hike junkies would soon step in after the news shock. In fact, I was so confident on my technical setup that I even risked a whole 0.5% of my account on the position. As Julia Roberts once said, “Big mistake. Big. HUGE!!!”
Obviously, my first mistake was not pausing before I pulled the trigger. I should have considered the possibility of the PBoC’s aggressive move being a game-changer for the dollar’s intraweek trends instead of immediately treating it as a sign to buy the dollar at a better price.
My second mistake was placing my stop loss waaaay to close to the current prices. I forgot that yen pairs and tight stops don’t usually go well together. If I had a wider stop, then I would have had a chance to close my invalidated trade idea somewhere closer to my open prices.
Last but definitely not the least, I could have broken my 0.5% positions and spread my open prices instead of dumping everything in one price. Kind of like testing the waters first to see if my fundamental and technical biases play out instead of jumping head first. What a cold, expensive lesson for me!
Hopefully I’ll have more patience and finer plans for my next trades. How about you? Did you catch any of the PBoC-related moves last week?