As alluded to last night, this post is dedicated to a recent trading mistake I made, how I did and what I'm doing to prevent it from happening again.
Firstly in terms of context, I've previously mentioned that I've dabbled in many different types of instruments, ranging from micro-caps on the ASX to commodities futures. The markets where I have gained and lost the most is probably the futures markets. I like futures because they are easy to trade (neigh on 24/5), have an inbuilt margin, and understand from a technical perspective.
So over the last couple of weeks, I have been slowly building a position in the Corn Futures, compounding as the price moved in my favour. Over time this leads to a pretty hefty open profit, around 8 to 1 compared with initial risk (i.e. distance from my entry to initial stop). This was psychologically quite thrilling, as I haven't had such a big open profit in quite some time (through meddling with different systems and changing my approach, and generally not having a lot of confidence in my system).
Anyway, so what did I do wrong. You can probably see from the language in the para above, I let my emotions get hold of me. This created a bit of fear for the big open profit. This was then exacerbated by an email from my broker telling me that my position would be auto-closed soon as corn is a physical delivery contract. For some unknown reason, my broker doesn't want to receive several thousand bushels of corn at their office… I can't understand why. So essentially closed my position before my exit point based on the above, even though I had around 20 days until the autoclose. Why did I do this, I was scared of giving back the open profit, and I had the excuse of my brokers' email. I should also add that when I sold, the market was retracing a little, which also adversely affected my emotions.
So what was wrong with this decision:
So what's happening now:
So what have I done to stop me from doing this type of trading error again:
The key thing that I keep telling myself though is to not dwell on the mistake but to learn from it.
Anyway, I hope someone finds this helpful and can avoid a trading mistake themselves.
As always, happy trading and thanks for reading my blog.
Nick the Trader Guy
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