LEARN FROM MY PAIN: MY BIGGEST MISTAKE EVER
I debated whether to even post this because it may take away credibility. However, my main credibility is that I tell the truth. The above chart shows the single biggest loss I have ever taken since I began trading, and it just happened. One of the problems I always have is it seemingly takes me forever and alot of pain, when I try to implement something new that I have learned. When I mentioned awhile ago that I was trying to change my trading style somewhat I never drreamed I would put myself through what I have the last couple of months. It has been brutal.
One of the trades that has absolutely killed me over the years, is these two point divergence trades. I learned a new way to do them recently, so I thought I would try one live. I should have known better, but apparently I did not. However, it should have been just one stupid trade that I never should have done, it was not.
I took my normal risk level of 2% on this trade just like I always do. However, what happened is that I was filled overnight on my short, then the market had a monster reversal back up and I had no stop in for the exit. By the time the pit opening occurred, they gapped it up even more and I puked out at the market having doubled my 2% loss, making it 4%. Now most people would not think that is such a tragedy. For me, I have never lost 4% in one trade ever, and don't want to ever do it again. Yes this was an awful trade, one I will never try again no matter who shows me what on how to do these. The mistake I made was not placing stop orders that were linked to the fill of the original.
Most trading platforms allow this to be done nowadays, PFG has a great one, TradeStations is very complicated but still can be done. What I would suggest to everyone trading now with these huge overnight moves that we see on a daily basis is to make sure when you place orders, you also have your exit orders linked to them. I have never had this happen where I was filled overnight and then had the market reverse so sharply that it went through my exit price on the other side. However, all it takes is once. This cost me an extra $12,000 so that is certainly enough to drive the point home with me.
Hopefully those who read these will learn something from this. The other thing I learned is how many breakable items I still have at home. The good news is there are not many left now!! I have never been as pissed off about a trade as I am over this one. The good news is that I will never forget this mistake as long as I live and hopefully this will help someone else avoid the same fate.
Have a nice weekend