Over confidence

[tangara]

Hello, I am a new currency trader. Yesterday I made my first live trade going short on the USD/JPY pair and made a nice profit. Now because I have got off to such a great start, could I be setting myself up for failure in the future from over confidence?

[shadow]

That depends on how you feel about the trade. If you feel like you are smarter than the market, or untouchable, then you may tend to put on a bigger position size, and set yourself up for a big loss, or not follow your system. However confidence is good, it helps you follow your system, and you tend to trade better if you are in a positive state of mind. Remember, that it is only one trade, the more you take, the more you'll learn to control your emotions. Besides when you lose, you'll get taken down a peg, believe me, it will help you get serious. As long as you can keep your discipline it's fine. Anyways good job on the trade and best trading to you on the next one!

Stay cool, take it Easy!

[ForexNinja]

The real question is: Did you follow your trading plan to a t?

Why did you short USD/JPY?

[tangara]

Thank you shadow and ForexNinja. Yes I did follow my trading plan to a t. I won't be trading with a larger position size, instead I will continue to stick with my plan as recommended.

[ForexNinja]

Excellent! Like my sensei repeatedly told me:

Focus on the process, not on the profit.

[topgun]

I felt the same way because when I first started with real $$$ I stayed in some of my trades while news came out and the news went my way so the trade worked out perfect. I am finding out the hard way now that the news doesn't always go your way because I have been burned many times on bad reports. I am considering closing any trade prior to news being released like Big Pippin does in his Cowabunga system. Of course if it takes off in my direction you want to beat yourself up for getting out but it is the safest way to stay in the game and win in the long run. It's more like a gamble when news is coming out. Good Luck to you.

Topgun

Originally Posted by tangara

Hello, I am a new currency trader. Yesterday I made
my first live trade going short on the USD/JPY pair and made a nice profit. Now because I have got off to such a great start, could I be setting myself up for failure in the future from over confidence?

[pipbull]

Originally Posted by topgun_68

I felt the same way because when I first started with real $$$ I stayed in some of my trades while news came out and the news went my way so the trade worked out perfect. I am finding out the hard way now that the news doesn't always go your way because I have been burned many times on bad reports. I am considering closing any trade prior to news being released like Big Pippin does in his Cowabunga system. Of course if it takes off in my direction you want to beat yourself up for getting out but it is the safest way to stay in the game and win in the long run. It's more like a gamble when news is coming out. Good Luck to you.

Topgun

You make some good points TopGun but the problem then becomes before which news releases do you exit your trades? You have all kinds of news besides USD news that could be a potential catalyst to the market. If you start exiting your trades before any kind of potential move prompted by news then i think you are shooting yourself in the foot.

I think the best thing to do is establish which news releases have historically been the least predictable, that is, those that have a tendency to create big whipsaw moves in the market within the first 30 minutes after the release. Only 2 come to mind on a consistent basis...NFP and Interest rate announcements. Other than that, i think if you let all kinds of news chicken you out of your trades then you are only hurting yourself. The point is, and forgive me if i am restating the obvious, when the news does work in your favor, the idea is to let the trade ride. So even if the news is a 50-50 "crapshoot" you are letting the good ones profit to the point that they outweigh the bad ones.

[rhodytrader]

Originally Posted by pipbull

You make some good points TopGun but the problem then becomes before which news releases do you exit your trades? You have all kinds of news besides USD news that could be a potential catalyst to the market. If you start exiting your trades before any kind of potential move prompted by news then i think you are shooting yourself in the foot.

I think the best thing to do is establish which news releases have historically been the least predictable, that is, those that have a tendency to create big whipsaw moves in the market within the first 30 minutes after the release. Only 2 come to mind on a consistent basis...NFP and Interest rate announcements. Other than that, i think if you let all kinds of news chicken you out of your trades then you are only hurting yourself. The point is, and forgive me if i am restating the obvious, when the news does work in your favor, the idea is to let the trade ride. So even if the news is a 50-50 "crapshoot" you are letting the good ones profit to the point that they outweigh the bad ones.

I agree that one cannot and should not look at every possible data or news item as a reason to get out of the market. Most of them are pretty meaningless in terms of market reaction. As you say, NFP and rate annoucements are movers. I would also toss in trade figures. They can sometimes have a big impact as well.

It really comes down to your holding period and your stop level, though. If you are trading short-term and you have a stop that is within the sort of normal volatility range of prices after a data release, then you probably want to get out. It becomes a crapshoot and sometimes even a number or announcement that is generally in your favor creates a weird opposite reaction at first. As we all know, there's not much worse than seeing the market take out your stop then reverse shortly afterwards.

If you aren't a short-term trader, unless your stop is quite close to the market (hopefully because of market action, not because you put it so tight), then you definitely want to ride it out.