Tuesday, October 14, 2008

10-13 USD/CHF Trade ( I am right no matter what)

I can say with confidence that "I am right, no matter if I win or lose a trade." This may sound like I am confused. How can I be right when I lose, if I think I can win? The answer is, if I TRULY believe that the market can do anything and I have no control of the market, then I am right no matter if I lose a trade or win one. After going back to reading "Trading in the Zone" by Mark Douglas, a little light bulb flickered enough for me to see some things. OK, let me not kid myself. Actually, it was a blazing spot light that I saw and for whatever reason NOW, it hit me like 2 tons of bricks. For three years I have been in competition with the market. I have made great strides, in my opinion, toward my goal of consistantly winning trades and have results to show my progress, but the mental aspect has plagued me over and over concerning my approach to the market overall. I am competitive to be sure, but to think that I can "win" over an "opponent" with such deception, volume of cash available to it at any time and irratic if not surprising behavior is absolutely obsurd, yet, I felt that I was actually in competition to try and do so. Nothing could be further from the truth. What I have recently realized, (no matter how simple it was yet I could not concieve it) is that I am ALWAYS right when I get into a trade if I follow these beliefs:

1. I can only know what a technical pattern or set up looks or feels like.
2. I can only know how I am going to manage my trade specifically.
3. I can only know how much I am going to risk
4. I can only know that the market is capable of doing ANYTHING.

When I realize this, I am right everytime I enter the market. The things I don't know, that may cause me to lose money on a trade are:

1. I don't know when someone else is going to enter or exit the market or HOW BIG their position may be
2. I don't know what fundamental news events could occur at any moment and affect the market.
3. I don't know what can happen next on a global scale to have impact on the market.

I also know that it is imperative to protect myself with low risk exposure because of what I DON'T KNOW. This is simple to say the least, but is very hard to implement (at least it was for me and the statistics build a case for 95% of all traders). I can say NOW that because of recent market action, I DO BELIEVE that anything is possible in this market and now I make it a must to approach every trade in that state of mind. When I get ready to enter the market all I can know is my plan, my entry, my exit and most importantly my risk, and I MUST BE WILLING to realize that my risk amount is very likely to be taken from me at any moment. When I do come to terms with this, trading is not about fear, but about letting the market unfold at ITS WILL. All I can do is put as many probabilities in my favor as possible, and I do believe by doing this I can profit from the market more than I give to it. That is the HOLY GRAIL. There is only so much analysis I can do, the rest is in the market's control. The main thing is that I know proper analysis sets me up to grab profits from the market, but if I do not, I am not wrong, the market just proved to my why I am right, that yes, ANYTHING CAN HAPPEN. With that being said, I approached this USD/CHF trade in that mental aspect, knowing that this market has been irratic at best. Although there have been some set ups, they have been hard to recognize (at least to me) but this one seemed to be unfolding to me. I prepared my proper mindset and traded this possible head and shoulders pattern. The 1 hour chart showed me a rejection of the level I have keyed in on and I just traded what I saw. I waited on a pull back using the 15 minute chart and got filled at 1.1399. I took profits out at 22 pips and moved my stop to entry. I got stopped out by maybe one pip on the remainder of my position but that's trading. The market proved that it was in control and I knew that was the case before I moved my stop to entry, but that was my decision. The market made it's decision and then chose to fall 100 pips over the next several hours. Oh well, I am excited over what transpired. It only shows me once again that I was right and can be right on every trade because the only thing I really KNOW is that you can't know what is going to happen next, but you don't have to, to be profitable.