Don’t Mix up your Trading Systems else this can happen!

Today, I took a trade using my usual support/resistance techniques. I had seen that WTI Crude had some trouble around the 100 mark and also had penetrated the Daily Pivot and looked like it was to fall. This was a pure price action trade and I went short at 99.82. My initial target was 97.55 which is around 230 points.

However, I’ve also been looking at another trading system lately which was sent to me by a friend of mine who I know has been doing very well. When I looked at the WTI Crude Oil on his system, it was showing a long signal which spooked me to exit my WTI trade at 99.64 and I ended up with a 18 point profit. Ok, a profit is a profit but when the market fell hard soon after and is currently 400 points away from where I entered (yes, my limit at 230 would have been hit)… it’s extremely frustrating and annoying!!!

The lesson here is to keep to your plan. If you have an entry via a particular trading system, you also exit the trade using the same trading system. Mixing and matching trading systems particularly on the same trade is not a good idea. I’m sure my friends trading system is very good and if you trade it over the long term, I’m sure you’ll make money from it but certainly taking a complete trade between two systems will certainly not give you an edge over the markets over the long term.

The pictures below illustrate what happened.My entry was off this chart, I identified resistance at 100 and then a fall below the daily pivot prompted my short entry…

I then thought I’d open my chart using my friends trading system, and this is what I saw (click on pic for larger image):

Although the price was falling, the 3 moving average lines (by the way, these are 20, 50 and 200 EMA) were showing red which means that price action is above the lines and the trend is up. That, coupled with the Supertrend indicator showing a buy prompted me to get out of my trade where I took 18 points and then this happens…

Price plummets like a stone. My limit order was 230 points which would have been very lovely.. however market falls around 400 points from my entry!!

Although a small profitable day.. extremely frustrating as it should have been a hugely profitable day on a silly mistake!

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Category: Trading