What evidence can you point to that illustrates a person is more likely to “crash and burn” trading commodities instead of Forex?
You made the claim that the former should be avoided because of a personal (anecdotal) experience that left a bad taste in your mouth. There are firms with commodity traders who trade these markets every single day and the world doesn’t stop spinning.
The advice your giving is harmful and doesn’t advance the discussion. What if this person had a proclivity to trading commodity-based instruments and was able to develop a strategy that worked in the oil market for 3 years without issue. If they took your advice, they’d walk away from it and never realize their potential.
Individuals need to have the freedom to make their own mistakes and learn from them on their own terms. Limiting someone because you had a bad experience does not give birth to freedom to fail. Failure is the best lesson - there is no denying that.
Also, I would argue that the Forex market is much riskier from a pure functional standpoint, and, that a savvy trader can’t put on very well-defined risk trades using commodity derivatives. It just boils down to discipline- in other words- it doesn’t matter what you are trading.
Just because I’m trading forex doesn’t mean I can’t over-leverage myself, trade without a stop, not take profits, ignore my trading plan, etc etc. Every instrument is subject to outlier events (e.g. tail risk) and no one can predict those with any amount of accuracy- it’s the risk every trader takes when they put their money on the line.
Thank you - My risk management (which was decent in the past) went totally out of the window because I was confident oil would just continue to climb, especially after the confirmed OPEC cuts at the beginning of June.
The perverse thing is that if I had just held my nerve and not done anything I would be doing quite well now.
I have neither the stomach nor the bank balance to double or triple what I have already done. I think it will take me quite some time to make this money back.
He uses words liked scared, purgatory, losses, not the most positive terms I’ve seen used in trading.
I put my money on the line every day, I count myself as a successful trader, at this time I’m about to place 5 trades, I have 3 in play and I expect 60/70% strike rate.
My account is on target for a 20% gain this month.
So again I say if your game is as good as your rhetoric then you must be in the 5% and I respect you.
However again as I say my aim is to help and guide others, not argue for the sake of it.
I think some of you miss the point here. @Xanel unfortunately messed up because of his own trading psychology not because the market was any harder than Forex.
All markets are hard, or easy depending on how you trade them.
What is consistently hard (for beginners) is accepting losses.
And @Xanel - major no no to make a trading decision based on anything Opec have to say.
All trades must be filtered through a technical framework - not some ‘fundamental news’.
Totally agree and that’s why we’re all here. Take it as you will- but there’s no argument. There are two sides to every story and two sides to every trade. My position (backed by others) was simply a counter-point to your advice, which is how a thoughtful discussion develops. Criticism of your own opinions should be welcomed and considered, that is the scientific way to approach thinking and life in general. You think about one thing one way for a while, and then new information enters the picture- you apply critical thinking and first principles- and, if it debunks your original way of thinking you must adapt or risk every other original thought you have going forward to be tainted.
Whatever the result was doesn’t matter for this one blip in time. If you’re serious about becoming a professional and you have years and years ahead of you to trade, you will move on and try to learn from your mistakes. You did the right thing, even though it may have been too late. If you keep on this trajectory, you’ll notice that you start “doing the right thing” earlier, and earlier, before your position turns into something you can’t manage (e.g. cutting your losses early, managing risk properly, having a plan before placing the trade, etc). This is the way.
Happy you turned around and live to trade another day!
-Jake
i hope you did not close the trades oil might be going to 39
any way
set your timeframe to m15
and moving avg to 20 expo medium price
and wait for the mov avg to be broken
A post like this does not further thoughtful discussion.
They did the right thing and moved on already.
The worst thing you can do is play the shoulda/coulda/woulda game at a time like this. The market could have sold off 15% 10 seconds after they booked their loss, or, it could have rallied 15%. It doesn’t matter and the proper thing to do is move on to the next opportunity.
@Xanel, You could have applied the strategy as demonstrated in the linked thread below (5 Posts).
You could have held the loss and/or waited for it to reverse… which it has… to improve the result.
Maybe next time it might be worth considering alternate risk management strategies.
Just relying on a Stop loss in these markets is like turning up to a gunfight with a pocket knife…
At the time of your OP… no one here with standard Forex education could have saved you from this disaster…
Hindsight is 20/20 vision for a great many in these forums…
Hi Xanel,
We are getting somewhere now. This is something I can relate to in my past trading. I started to be a serious gold bug around 2011 (not surprisingly). Gold has been part of our long term strategy since 1998, and I even recall some horror stories back from 1979/80 when I was a young oilfield engineer. It took me until about 2014 to understand the significance of confirmation bias. Since then, in my investments and in my approach to trading, this has helped me significantly. So as you calm down after the storm, revisit your risk management and ask yourself why you decided to deviate from it. For sure this is a psychological effect, and in seeking confirmation you would have naturally sought out news that favoured your own “gut feeling” that oil was a one way street certainty. I now have almost the opposite problem. Sometimes it creates analysis paralysis. I continue to be comfortable making my weekly Crypto purchases (investment) and am still very wary of pushing the button on my trading ideas. But I know that if I push the button without having written myself a plan specific to the underlying, my performance will be no better than it was last time around when I always found concurrence with my ideas due to confirmation bias. I hope this helps in the longer term.
I think confirmation bias is massive in both the precious metals and crypto markets.
The gold bugs believe it’s the only real money and will never change their mind, the crypto fanatics are in general are clueless as to how to make money in the markets - Hodl being their strategy.
Of course there are savvy traders amongst them but these markers are hyper emotional.
Confirmation bias is rarely spoken of on Babypips but it’s when you recognise it you evolve as a trader.
SMA’s are a good indicator, one of my counter checks sma 21 and sma 6 and seeing if a cross over has occurred, I have found it to be a fairly accurate in predicting the trend, and a buy or sell signal.
Hi @Xanel, have a read back through the strategy… you do not double the opposing trade… you match it ie: 0.5 lot position is matched with an opposing 0.5 lot hedging position.
Doubling the position would effectively be a Martingale strategy which is dangerous. You are only locking the loss, not trying to double your way out, then you wait for price action to minimise your risk.
So many traders here simply do not understand hedging and therefore to their detriment dismiss such an important risk management tool.
As I suggest with every strategy I post in this forum, trial it on Demo first… So you completely comfortable about what you are doing and why… You need to have your psychology when live trading under control and the best method is just practice, practice and more practice.
After all has been said and done now I am thinking about this whole episode and what I could have and should have done better. I want to write down all of the things that happened and my rationale for acting the way I did. I’d appreciate any of your opinions on where you thought I went wrong and what I should have done differently (or even the questions I should be asking myself). This whole episode took place over the whole of June and looking back I don’t understand how I allowed it to spiral out of control the way that it did.
I decided to place a long trade on oil on 2nd of June because the price was climbing and I felt it would continue to climb, there wasn’t much more behind my decision. I thought I would take a long term view and sit in the trade as the world was opening up and demand for oil would grow. I decided that I would add to my position in $1 increments (as the price of oil climbs I will add to my trade) in almost the same fashion as taught here:
I followed this idea but I kept my stop loss quite wide due to my confidence in the oil market climbing and also more than that I felt that if I moved my stop loss up in $1 increments I was certain to get stopped out because of market volatility (15 day ATR at the time was about $2)
Perhaps what I should have done here is add to my position in $2 increments and that way I could bring up my stop losses in those same $2 increments which would have probably been safer - What is your opinion on this thinking?
Everything was going well, OPEC meeting on 6th June etc. Oil reached $40. I remember my floating profit looking wonderful and I felt that if production cuts have been confirmed till the end of July I can put my feet up. I have very recently had a crash course in a lot of the economic releases that impact oil (although market response to them seems inconsistent)
Immediately as we went into Monday morning (I am in the UK so GMT/BST) the oil price dropped and I had no idea why. My floating profit had halved in a very short time. I decided to stay in the trade because of my long term view and also, I suppose, the principle of letting my winners run. I felt I would be short changing myself to jump out of the trade after everything looked so good.
Should I have just jumped out here at this first sign of trouble? I have read so much about not leaving trades prematurely and the price did settle quite quickly so I thought to stay in the trade. To give some perspective, i had been in the trade for 4 days and had profited a $4 move. I guess it probably was time to jump ship when things turned around.
The next day the price dropped and I was still in profit and I decided to be strong and hold my nerve, thinking it was just a blip.
Wednesday 10th June came around and there was a brief moment where the price spiked up (because of an economic release) this gave me renewed confidence and I stopped worrying, all while the price of oil dropped.
Thursday 11th June was awful and everything dropped but I felt I was losing too much money to close my trade and that I should just wait for market to return to its highs. I decided to hold my nerve.
By Friday 12th the market had dropped a bit further and after reading a lot of negative news and that there was a key support level at $36.07 which the price did breach. In a panic I decided to place a short trade as a hedge equal to my 0.4 lots. I should have closed it as price turned around and climbed but again I felt that I was losing too much to close.
As the oil price climbed I never closed my short trades and as the price came to my long trades I started to close the longs with minimal profits (maybe £10 each).
By the end of this episode I was in a position where my drawdown was now even greater and I had short trades placed at the floor of the market.
As price climbed and my drawdown grew there were mixed signals of a breakout to the upside and I really began to panic at that point. That is when I posted this thread worried that price would shoot up. I tried to hold my nerve but eventually gave up and then did what I mentioned which is place the long trades to effectively lock in my loss and this is where I am now.
It seems as though I am ok to hold my nerve but I just seem to lose it a bit too soon. If I had waited a bit more when at the floor and ceiling of these markets, I would have been ok in all of this.
Then the following day 25th June the market tumbled which was annoying.
If you have read all of this and are willing to pass on some advice, thank you.
My main discuss/questions are around:
Risking too much money - the money at risk really affected me, I havent eaten, slept or exercised properly this last couple of weeks
Should I have just got out at the first sign of trouble?, or
Should I have simply held my nerve and stuck with my long term view? If I had not done anything I would have been fine as the price of oil fell and then climbed again
In this case my question is one of timing. How soon should a trader deploy this tactic? I think you mention employing this strategy wherever one chooses to place a stop loss. Do you think this should be a tight stop or wider?
You will see from what I have written above that I did place an opposing trade of equal lot size but I did this when my drawdown became unbearable and I basically now have opposing trades on both extremes of the range. I now have this floating loss wherever the market goes. Maybe I left it too late? should I have placed the opposing trade a lot sooner?
