The biggest problem here was that I did not follow my trading system…  to be a good trader, one needs to be disciplined and follow his or her system… I’d been talking about this and yet, I didn’t follow the system.. ugh! The good thing about putting all this into a blog is that I can review what I have been doing.. I find that if you don’t write something down with your thoughts, what you remember seems to change. It is good that I can write that I didn’t follow my system and as a result, I can see the consequence of it… I lost.

The other good thing about writing it all down is that I can write down my thought process at the time of trading.. why did I make the trade, what was my thinking behind it etc. I also shouldn’t leave it too long to write why I did the trade else one forgets….

So, what did I do? Well, the first thing which I was thinking was that he distance between the top of the range to the bottom was quite large at just over 50 pips.. this means that any loss is going to be a 50 pip loss. I also have it in my mind that the more the market moves initially, the greater the chance of a pullback. The range is determined by taking the lowest and highest point between the hours of 4am and 7am. The thing is, the market at gone 6.30am had started to move quite sharply down… from 15280 to 15240.. a quick 40 pips before 7am… I thought that I had missed the move. So, what did I do?

As the market went down from 6.30am and retraced a little, I manually entered at 1.5244 with a 30 pip stop and 30 pip target. The problem is that the market had more to retrace and reached 15282 before it promptly fell.  I got stopped for -30.

If I had followed the system with a short at the break, it was 30 pips in the bag. If I had my second trade which runs for 60 pips, it would have worked out too. It could have been 90 pips in the bag today!

Well, the extra 30 pip move was the low of the day and the markets soon shot up and hit my stop for a 50 pip loss.

Lesson of the day.. don’t chase a market! If you have missed it, leave it.. there is another trading opportunity the next day.. well, not tomorrow as it’s the weekend.. on Monday!

As I write, the GBPJPY price is at 15620.. it bounced perfectly off 15645…

In the 1 minute chart, the 20 minute moving average line (which was functioning as resistance) became support and I traded off a bounce and got in at 11244. The market soon shot up and bounced off 11300 and I closed out at 11286 for +42.

The market has since reached 11360 which is another 74 points which I missed out on!

I bagged my profits trading the Dow but as usual, I failed to capitalise… still, +42 isn’t bad!

However, I took profit at 1359 as the stochastics were looking to cross as you can see in the chart.. the market may well go higher as the stochastics have more to go in the 5 mins but I don’t want to risk it!

I got +2 points which isn’t a bad result!

The market fell sharply and I took my profit at 1.6235 for 40 points! I am still unable to ride the trends.. I was thinking it being Friday and the market being close over the weekend, it may open with a gap.

Anyway, I didn’t even leave the market to hit target and to be honest, the market is heading my way I should still be in. The take profit with this strategy is to open 3 lots with a 30 point target for the first, 60 for the second and 90 points for the third.

If I had followed this, it would be a nice 90 point profit already with the third trade open with 60 points in the bag.

The problem is, I am still testing this trading strategy and only open opened 1 lot….

Anyway, I entered another trade after the previous and make all the losses back to close at 0.3 points in profit! Hoorah, at least it wasn’t a loss!

As I mentioned earlier, I was talking about the head and shoulders pattern. It wasn’t a perfect pattern but as I write, the market has indeed reversed and hit my targetted endpoint at 1388 and indeed has gone beyond this!

In addition, I didn’t mention my Fibonacci placements.. you can see that the market hit an almost perfect 50% retracement level and went lower. There was round support around the 23.6% level so which was a good point to go long.

As I am watching the markets every day, I feel that I am starting to understand the mechanics of how it works.

My biggest downfall is my inability to hold a trade. Market movement is never in a straight line and zig zags up and down. I need to have the guts to ride through the zig zags and not get out at the next zig or next zag! My entry points aren’t bad when I am disciplined… however, I am let down by my eagerness to get out of a trade either through fear (scare to lose money) or greed (bag the profits I have for trades which are going my way).

Trading successfully takes time.. there are many steps and each day you learn from mistakes. However, sometimes what you think are mistakes are not mistakes but just probability or luck against you.. it’s in these situations when the lesson you think you take away isn’t a lesson at all.

Through this blog, which I use as a reference to my trading progress, I have material which I can use in hindsight to understand what I did write or wrong. In the heat of the moment when you are actually trading, it’s it difficult to see what you’re doing right or wrong.. through hindsight, I can spot my mistakes.

Anyway, I went long at the second shoulder.. the market moved 2 points up my direction.. it was looking good and then tanked, breaching the limits of the second shoulder, ruining the perfect pattern which had form and more importantly, taking out my stop for -2.5 points!!

Anyway, the market went up and I got out at 1381.53 (I actually closed when the chart reached 1382 which was my target exit) for the equivalent of 2 points profit which isn’t bad.

However, as always, I took profit early and the market has hit a short term peak of 1385 and is now retracing but could look towards going higher again from here as it has gone beyond the previous days high. Still, a profit is a profit!

One thing which I need to be careful of is that I am and trading off the indicators more than the price action. It is the price action which is determining the indicators and not the other way round so I need to be aware of this. The indicators are great once you’re in to gauge whether the market is running out of steam and an exit point.

Anyway, back to the DOW today. I went long at 12754 and got stopped at 12736 for a loss of -36. Once again, I went long at the top of the pullback….

Then I read the comment from Stephen McCreedy (thanks for the comments in a few of my posts) about trading the S&P rather than DOW… he’s absolutely correct, I never hear anybody trading the DOW but you do hear people trading the S&P.

Anyway, I switch my charts to look at the S&P instead and went long again!! The whole chart is screaming short and I go long… I am not sure what is wrong with me but I got stopped out and took a -3 point hit (1 S&P point is about 10 DOW points).

The last trade when I was getting increasingly frustrated was finally the right thing to do.. stop and reverse of the previous trade, a short at 1406 and I took profit at 1400 for 6 points (or 60 DOW points).

The market is moving lower still (the old problem of not being able to hold my winning trades) but I have made back all the losses of previous and ended up completely flat. I don’t think I should trade for the rest of today as the trading psychology isn’t quite right today with me but at least I’ve not ended up with a loss today!