The trading account is closed to withdrawals for a while.
Not that anyone has taken money out, but I know it is disconcerting not to be able to.
I made a big mistake, and it’s put us back many weeks.
I’ve wondered repeatedly what in the world was I doing—as risk management is so crucial.
Trading heavily in the run-up to announcing our profits, I wasn’t necessarily trying to bolster the coffers—although that will be an aspect—it was, ironically, the protection of it.
But rather than protection, it became the fear of losing. So how does this come about?
I had committed to a weighty trade to XAU/USD (gold) and gave it more room to move than I do on any other transaction. I noticed a higher timeframe structure for its significant support (a fundamental error) and a probable return to the entry price, which it did.
But beforehand, the trade (as it’s now on a higher timeframe) needs to be carried overnight. Something I don’t do!
So if the price came back to the entry, what was the issue?
I’d loaded the account significantly higher than usual in anticipation of trading bitcoin in the future. The margin on bitcoin (no surprise) is exceptionally high. I’ve not traded bitcoin with any weight, so to have loaded prematurely was a mistake.
Moreover, my broker—something that wasn’t a factor before—offloads the trade automatically as the margin gets to 50%. So when margin and drawdown (losses in this case) combine, it can cut the account (the now more extensive version due to the bitcoin argument) at an eye-watering rate.
When I checked the chart at 4 am—sleep had been brief—and the price was in the ascendancy to the entry-level, my immediate thought was of relief.
But short-lived, as I noticed what had occurred with the automatic margin reduction and the subsequent cut to the account.
The responsibility for this is all mine. What the broker has in place is correct. I’d gotten myself into a position that should not have occurred, and I can say quite assuredly, never will again. I say that with such conviction because the stress from it is so enormous that you never want to experience it again. That’s for darn sure!
I have regrouped, been honest with myself as to what I did wrong and learnt from it. I’m trading small to build confidence, reassert strategy and recentre.
Trading small at the core amount of one lot and up to three lots per setup is in the region of tens to hundreds of pounds per day.
I was trading at a core of fifteen lots and up to 45 lots per setup. So you can do the per day expectation.
I will work steadily back up to that level but with much-improved dependability—no more big bangs!
Apart from a greater awareness of risk management, what else have I changed through this lesson?
- Know what setups work best for me and only take those.
- I’m quicker to exit when it’s not working and better at holding when it does—loading appropriately on my best entries.
- I now trade from a higher intraday timeframe for structure, only venturing to the lowest timeframe for the fine-tuning of an entry.
- I now view more pairings looking for the ‘charts in play’.
My trading journal provides a daily profit—to know if I’m consistently profitable rather than an obsession with P&L—and I log entry quality which I score from one to ten with a brief explanation of lessons learnt.
A daily or even weekly report on the blog would be too much—for you rather than me! However, I think a regular end of month synopsis of my trading journal would be beneficial.