The Stresses of Trading Crude Oil
Today was a very interesting day in terms of my trading psychology. I was able to see where I went wrong and also analyse my trading psychology and where I went wrong.
I mentioned in a previous article about the importance of where to put my stop and one thing that I did well today was that. My stop was below the previous low and therefore support at 8847 (which is a little bit below the actual support at 8860 to take into account the stop hunters and spreads).
The trade didn’t really get to a good start… it lingered for a while before dropping. If I had set my usual 50 pip stop, I would have been closed out for the loss and I would have got annoyed with myself as my stop was in an area where there was no support at all. Support was found at 8880 and you can see how I was able then to draw a rising support line (in blue in the chart).
The market did rise from here to 8960 before it fell hard.. it cross my blue rising support line and bounced… phew, so far so good I thought. However it was the next move which got me.. the price action penetrated that rising support line again and it looked so easy.. at this point I’m already 50 points down and counting.
The market finds support again at 8860 which was the previous low and here I was really feeling the heat.. I was 70 points down at this stage and my stop was another 13 points away. If my stop was hit, I would be 83 points in loss! UGH!
Market soon rallied which was a godsend but the pressure of this made me close my trade with a point profit… this is an interesting trading psychological situation. The fear of nearing losing 80 odd pips made me change my gameplan and I close early. My trading discipine therefore got shot to pieces after the ‘stress’ that was felt. One needs to fully embrace his/her potential loss when putting on a position.. failure to do that will result in long term trading failure! UGH!
My initial target was the previous high at around 9000 and as I write, the market is moving higher.
The other thing which I see now is the risk/reward ratio.. I was risking 80 odd pips for 70 pips potential profit. This is not really a good trade to start with and I was lucky to not have been caught out with the trade today.
