When NOT to trade?

Do you know when NOT to trade?

Well…I just determined the perfect scenario when NOT to trade. :-)

I have spent the last 3 hours trying to get my microphone working in Skype. The microphone works just fine with EVERY other application. I have never been a fan of Skype for exactly this reason…it never is something I can rely on, it seems. And, the only reason I’m using it is because I have a trader with whom I’m doing a workshop in a few hours…and the ONLY way we can communicate is with Skype or something similar.

So, why do you get that story?

Because…well…it’s been a trading session that reminds me that there are times that are simply NOT good to trade.

Yes, the market must be logical and make sense. But, that’s not enough. *I* also have to “make sense”. It’s never a good idea to trade when tired, sick, distracted…or especially *frustrated*.

So, I started looking at my charts about 12:45am US/Central. I watched a moderatly good trade setup on the EUR/USD around 12:50am.

The setup didn’t quite fit my normal criteria, such as me preferring to see all of the same colored flow lines all on the same side of the solid black line. But, I was still “tempted”.

And, that’s “warning sign” #1…”Don’t trade, Greg!”.

I ignored it.

Remember….I was still in a frustrated stupor from wrestling with Skype. And, that kind of frustration will often cause me to be MUCH too aggressive. Uh oh.

So, thinking frustrated stupor thoughts…I turned my attention to the EUR/JPY. Why? Well…it *always* moves. I’ll be able to FIND a trade there sooner than the EUR/USD.

Warning sign #2. What kind of thinking was THAT?!

Already “hyped up” and more aggressive than normal, I turn my attention to a currency pair, the EUR/JPY, that requires the UTMOST patience to WAIT for good setups…my normal conservative trading style, waiting for everything to “line up” and make sense.

Did I pay attention to Warning sign #2? Nope.

This is looking grim for me. ;-)

So, here is the “big picture”. It looks moderately okay…but certainly not as “pretty” as the previous zoomed out chart images I’ve posted recently.

### EUR/JPY Zoom Out Market Structure

EUR/JPY Market Flow

EUR/JPY Market Flow

*** TRADE #1

From the zoomed out view, the highest probability trade was most likely to setup for a sell.

At least I was patient enough to do that. :-)

Just barely, though.

You’ll see that I was obviously trading MUCH more aggressively than normal. Do you notice that the Logical Forex Flow Lines aren’t like I normally prefer them? You’re right…they’re not.

In fact, it’s just not a pretty picture at all…certainly not like the other charts I usually post. Sigh.

Ahh, yes, but my frustrated stupor won out….and I entered the trade.

Oh my.

EURJPY Too Quick In Every Way

EURJPY Too Quick In Every Way

I’ll say it again…this is a great example of…me being too tired, and too frustrated about “other stuff”…I should not have entered here because my “tolerances” were all wrong.

But, was I “right”? I mean…ultimately…did the trade work out? Did it move like most of the trades I enter?

Yes it did. But, did I take advanage of it?

Nope. My aggression ALSO caused me to bail out in a really stupid place. There was absolutely no reason to exit at the place I did. Yes, I made a few pips, and that was nice. But, if I was going to exit because the price stalled or went against me, I should have exited just a few moments prior to when I did.

But…what was I thinking when I exited where I did?

I dunno. :-(

Exit #1

EURJPY Too Quick In Every Way

EURJPY Too Quick In Every Way

Do you see where the REAL exit points are?

Yep…near the Logical Forex Magnet Line, or for the brave, when price went back stronger against the position, most clearly shown as it crossing back over the Logical Forex Groove.

So, why am I showing you this?

Because I want you to realize that we are ALL going to have “off days” and even “bad days”…and it’s up to our own self control to be able to STOP trading…or better yet…to never trade at all when our minds aren’t right.

Clearly my mind wasn’t right…even though I still pulled a few pips profit from the trade. And, maybe worse, between my own growling and barking, I felt stress. Wow. Warning Sign with Flashing Lights. That only means one thing…STOP TRADING and do something else. I know what “somethinge else” won’t be…fooling around with Skype. :-)

But, do you know what the BEST part of all this is?

Yep, you guessed it…I’m simply going to hit my “mental reset button” and come back later…when both the market AND me a “right, logical, have a nice flow and structure”. That might be in 10 minutes, or 10 hours, or 10 days…I’ll know when the right time is…just like you know yourself, too.

10 Responses to “When NOT to trade?”

  1. Greg says:

    Jim…

    For the example I posted, the biggest problem was ME. I hope I made that clear. My own “mental condition” prevented me from trading like I usually do…”in the flow” of the market…everything logical…and all the usual things you’ve read about.

    So, yes, what you have said about the trade being a reasonable one is definitely true. I just wasn’t able to execute it like I normally do, and that told me I needed to stop trading. In fact, I knew I wasn’t “all together” when I started trading, and that alone should have made me NEVER sit down to trade in the first place. It’s difficult being human sometimes. :-)

    As I mentioned, your observation is correct about the trade being a valid one…for MANY traders (maybe even most?)…but I tend to not like to take trades unless all of the Logical Forex Flow Lines are of the same color and on the same side of the “spine”…the solid thick black line. You’ll notice from the image that it is “close to forming that setup”…but not quite. And, again, this just tells me that I was impatient and too aggressive for my normal (and comfortable) trading style.

    Of course, for more aggressive traders, this is a perfectly valid setup…although I would hesitate to call it “high probability”, but it is certainly good enough to trade (especially for a trader more aggressive than me). And, applying the “in and out quickly, whenever it goes against me” would have worked out very well.

    From you comment, it sure seems like you are developing a keen eye for trading Logical Forex! That’s great!

    -Greg

  2. Greg says:

    Hello Koos!

    I have a very strong dislike for posting “how to do it wrong” trade examples.

    I much prefer to post “traps” and setups that might look good, but aren’t really as good as they appear.

    In the past several posts, I have been including a few of these kinds of charts…showing some potential “traps”…or even in this particular example…where I “trapped myself” by my own mental condition.

    I want the chart images you see to Train Your Brain to see the GOOD trades, and not the bad ones.

    Sure, some people learn from seeing bad results from bad choices…but in general, since forex trading is so “visual”, I only want to show you things that your brain can see and *reproduce* as GOOD patterns to trade. And, along with that, I’ll occasionally show a few “ugly setups” to avoid…so yes, you’ll be seeing more “ugly setups” posted…and there already are a few scattered about on the blog.

    Of course, I’m not saying I will never post a losing trade…but there won’t be many trades that are losers, especially on the high probability setups…and if they do turn out to be a loss…especially on a high probability setup…it will be because the market “went crazy” for a moment. It does happen from time to time…but I’m not sure what one could learn from that…when the market “goes crazy”.

    The simplest way to avoid or at least reduce losses is “in and out quickly, whenever it goes against me”…and even with a loss, they will be small, and quickly recovered in the “next” trade.

    So, look at the last several trade examples I’ve posted, and you’ll see some examples of “traps”…and I’ll be posting more of those in the future…but I hope not too many. :-)

    -Greg

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