Learning the Hard Way: My 3 AM Trading Mistake and What It Taught Me

Trading Discussion
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Hey fellow traders,

I want to share a lesson learned the hard way during my recent trading week, particularly my regretful decision to enter a trade at 3 AM. This experience has reinforced the importance of patience in trading.

I was trading EUR/USD during FOMC. I didn’t use a smaller size, which I should have. The trade went up and then reversed, and trying to find a place to enter a recovery trade didn’t work, so I took the loss. I then reversed my position but realized it was too late, and I was tired, so I canceled it quickly. So far, it’s all fairly okay.

The Hasty Entry

At 3 AM, I woke up and checked the charts, deciding to open a short position as EUR/USD had broken to the downside on the 4-hour chart. I sized way too heavy but quickly realized it and reduced the position by half. Trading at 3 AM, I was clearly not in the best state of mind and didn’t give myself the chance to analyze the situation. This was a significant mistake that I won’t make again. The trade went against me hard, and I was still too heavy in sizing if I wanted to scale in higher.

Rather than taking the loss, I waited for a decent pullback, but it didn’t come.

A Day of Recovery

After realizing my error, I spent the entire day trying to manage the position. Instead of calmly assessing my options, I found myself sizing down in an attempt to mitigate the damage. I entered a trade on EJ, took the profit, and used it to size out of my position. I considered using GU as a hedge and going long, but I wasn’t calm enough to stay the course and closed early. It would have worked quite well. This poor execution only added to my stress, and I ended up taking a few trades too quickly without a solid plan.

The Importance of Calmness

Looking back, I can see that if I had taken a step back and adhered to my strategies, I would have made better decisions. I was not calm, which led to a lack of focus. If I had trusted my ideas and not rushed to recover from my initial mistake, I could have navigated the situation more effectively. Instead, I gave back a good amount of my profit. Sure, I mitigated risk, but I could have done better.

Key Takeaways

  1. Banned from 3 AM Trading: I was in a poor state of mind and should never have touched the charts.
  2. Stick to Your Strategies: Formulate your strategy and stick to it rather than trying too many things while sleep-deprived.
  3. Size Down: If I really want to trade FOMC, I need much smaller sizing. I lack the experience trading it.

This experience has been a valuable reminder of the need for discipline and the dangers of trading in a rushed state. I’m committed to learning from this blunder and ensuring it doesn’t happen again.

On the upside, I did manage to stabilize myself the next day and started to make back some of what I lost.

Have any of you faced similar challenges in your trading? What are some of your biggest lessons learned from impulsive trading decisions? I’d love to hear your stories and how you managed them!

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Bravo @Clear_Trades!

I really enjoyed reading this post, thank you. Sure there were mistakes made, (I’ve also made more than my fair share of boneheaded mistakes) but what is very clear is that you have actual trading skills. Refreshing to read about a trader take aggressive action when in a losing position, instead of going all “deer in the headlights” and letting the losses become catastrophic.

I personally love to read about how experienced traders manage themselves out of losing positions. IMO, these are the real skills that separate the pros from amateurs.

My style of trading / investing has evolved from daytrading / short term swing trading to very long term portfolio management. Back in early 2021, I recognized the emerging opportunity in precious metals (gold, silver, platinum, palladium) and commodities.

I went in too heavy in some stocks that had very low production margins during a pullback in gold and commodities. These stocks started dropping like a rock. So I had to bleed out and lighten some positions to buy silver put options to make back some of the losses then buy back what I sold at lower prices. There were also a couple of names that went down by 75% because I didn’t have the patience to wait for gold to bottom, these amounted to a 3% loss with a temporary open drawdown around 20% before gold bottomed. The portfolio recovered with the rise in gold prices but they were still annoying mistakes to make.

It’s a continuous learning process. The big lesson here is that as a long term trader / investor, you are paid to wait. The more patient you can be, the more profitable. This came in the form of an opportunity 6 months later to buy a producer at a ridiculous discount, it had more cash on hand than its market cap and had hit one of the largest gold deposits in Australia! :star_struck:

Needless to say I decided to take a heavier position than normal and it grew 4x before the gold breakout earlier this year. It’s currently up at 7x, the single largest position in the portfolio while there’s still a long way for the gold bull and the portfolio to run including the parabolic phase.

Key lesson: As a trader, you are paid to wait: Of all the necessary qualities required for trading / investing, patience is by far the most profitable.

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It’s so healthy to read a well reasoned analysis of a trade which went wrong. Lessons here for every trader.

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Thanks! Appreciate your perspective and your compliment!

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Glad you liked it. I believe it’s best to share it all so we can learn from each other’s journeys. Enjoy the weekend!

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It took courage to not only admit but also share your mistakes with others. Thanks for sharing your story. The good side is that after realizing this mistake, you probably won’t lose money again because of trading in a sleep-deprived state at 3 a.m. ever again in your trading career!

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A great OP and a great response. I have been very frustrated over the last three months having not traded at all. But I have my strategy and my plan, and the market has not presented me with any opportunities that would make me pull the trigger. So as you said “we are paid to wait”, and I am still waiting :laughing:

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Yeah, I made a hard rule for myself for this. I don’t have many hard rules but this one is a worthwhile one.

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Love your patience! It’s not always easy but worthwhile imo. It often has paid of for me to wait.

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Hello, big thanks for the insightful story you just shared. It happened to me a while back. Trading out of my trading plan and on a day I wasn’t supposed to click any buy/sell button. I looked at the charts and thought to myself, this must be a very nice opportunity in the market so I took two positions with a massive lot size. Things were going my way until price hit a minor support level and reversed. I stayed in the trade a while longer thinking it was just a pullback but it ended up being disastrous to my account. I took the loss then made a promise to myself to be a disciplined trader and to always stick to my plan at all costs.

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Thanks for sharing. These lessons are so important. Impossible to be profitable if we have out sized losses.

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The problem was not the 3am trade cause if I analyze my chart and wait if my set up is on the 3am and there is no news then it was a good set up the problem there was that you were doing things against your rules and your trading plan that’s why you were not in a good state of mind as you said I literally blow my profirm account because of fear of missing out and I end up loosing the trade and I got stock with analysis paralysis and stare at the chart if I see any type of signal that kind of align with what is in my mind not my trading plan I jump in on the trade I took about 5 trade in one full night cause am a day trader and I end up loosing the 5 trade when I close chart and got up in the morning after my routine i decided to go through the loose trade journal I just accept the fact that I was gambling cause everything there was just totally wrong it really take a lot of discipline and hard work not to mess up in this game cause it affect you mentally from there I learn to trade with my head not my heart if I loose two trade a day am closing the chart even if have seen other opportunities cause I have other month years to trade I will never gamble again