How to learn from trading mistakes

Three weeks ago was a good trading week. Two weeks ago I tried to catch a ‘falling knife’ (a no-no in trading. But, again… hindsight). And then this week we almost made back for the falling knife thing.

The old trading saying is ‘don’t try to catch a falling knife, wait until it sticks to the floor, and all the wobbles stop’. Well, I know this, but when we don’t see it as a falling knife but rather as an extension of a wedge, we feel correct in taking it. It’s only soon afterwards that we realise that it’s an oops trade.

Okay, I’m starting to lose you in the terms. The thing for me to get from this is that I can learn from it. I take responsibility, and I take the lesson. Last week we had a couple more falling knives, one of which I ignored as couldn’t get a traders equation trade from it, and another I took correctly for a profit.

How did I solve my error? By backtesting. I simplified by going back to a maximum of 120 bars on the main screen, and that has worked an absolute treat. (comment added March 2018, later in my trading experience I have only 57 bars on my main screen).

Okay, inevitably these trading lessons happen from time to time, to all traders. ‘Take responsibility, embrace the lesson and come out stronger’…  that’s what I said to myself, and it worked. The wrong way would have been to ignore the lesson, trade more and try too hard to make amends immediately.

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