WHAT HAPPENS WHEN I MAKE A BAD TRADE?

I mentioned yesterday that I shorted the Yen, and here is the embarrassing result of that trade. I will show you the logic I used to exit this and take a small profit, which is a ....up on my part. I say that because with the logic I will show you, I never should have done the trade to begin with.

I was not too sure about this one from the get go, a sign I should have never done it to begin with. I went into Genesis to find prior patterns that I thought were similar to see if there was anything I could find to address my gut feeling the trade was a pass. The next chart shows the overall projection it brought back.

Obviously this is a very bullish projection, but even though these are uncanny a good portion of the time, they do miss as well. I can't pass just because I see this, I have to go study the individual occurrences it used in the calculation to see what best matches what is currently going on. When I did that I found that the next chart was the best fit.

You can see here that this is pretty similar to the current chart pattern. Once I saw this I decided to take the trade. You can see though that in reality, in this prior occurrence we just had one good bar, then it chopped for more than a week. That is not the type of trade I am looking for. When I saw the big overnight down bar that started retracing, I reasoned that we had the one large range move already and now we were going into a sideways move which was like the above chart. Once I concluded that I took the 50 points I had in profit at the time. I usually do not watch intraday, but due to this above logic, I was looking to see if any trouble was developing. I should not have done this trade in the first place, but I just give it straight up what I am doing in here, so there it is.

It is my view now that we are in bounce mode in most places here for the next few days, so longs should be the plays in most markets not shorts. If we do bounce then we can determine at that time whether or not the bounces are looking like retracement sells against new trends, or the first leg back up of up trends again.

The moral of the story here is, if you make a mistake, don't wait for it to burn you just get out and regroup. There is always another trade somewhere. If after exiting the trade goes on to be a winner without you so what. I find that for me I do the best when I just seek out my core setups, and stay clear of the marginal ones. I was lucky with this one in the Yen, but that gives me no solace. It was a dumb trade to me regardless of whether it winds up going down or not from here.

I do think we have to be watching Bonds closely up here now for a short entry.