Reflecting on bad trades

This weekend i’ve been reflecting on previous bad trades and two main patterns have arisen as a result.

Pattern#1 – Bad stock choices

I’ve not stuck to the rules on all 19 of my chosen trades so far. I should be picking trending trades and jumping on them with wide stops so I can follow them for a long time. Until now i’ve not been picking my trades carefully enough, and if I’m honest I already knew this.

My trades in ITV, BT and Stanley Gibbons were all picked after advice from a 3rd party. Funnily enough they were all losing trades and combined they lost me £135. My profit/loss would look much more positive had I not gone with these.

Ferrexo – tight stops were hit, they should have been wider to allow movement.

Pattern#2 – Stops not wide enough

Ferrexpo was a good example of this. Looking at the chart my entry is where the red cross lies. I was SHORT on the trade. However the orange cross was where my stop was placed and was hit. After I came out the price eventually moves into a profitable position. As a result, had my stop been wider I would still be in this and i’d be another £70 up today. Interestingly, my stop was placed inside the 20 day high price channel (they grey area that surrounds the rice line). I should be just outside this (i.e. if the price breaks the 20 day high or low then this is my exit). This may have been an error of accuracy on my part as i’d usually be outside it. If i had been, i’d be £70 up today.

Simply put, if I take these trades out then my system would be up another £200 so far.

Lesson’s learnt?

Well, I certainly won’t be picking any 3rd party suggestions anymore. I’ve a strategy for picking my own trades and clearly i’d be better off if I stuck to it. Secondly, I need to be more sensible about my stops and more accurate. The system should work, but only if i stick to it. It’s true what some people say about trading being 80% psychological.

Whilst all this sounds negative it serves to give me hope that my trading will improve going forward. I am a keen believer that there is a lot to be learnt from my mistakes and as long as I do spend time looking at my bad points and take in the lessons I should be able to prevent them happening in the future.

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