The Painful Truth Of The Week

22.06.2009 - 118
23.06.2009 - 8'587 (my scaled in bet that EURUSD wouldn't cross 1.40) :S
24.06.2009 - 2'035 (my bet that SNB wouldn't push EURCHF more than 200pips)
25.06.2009 + 1'239
26.06.2009 + 772

Well, there it is. My Nick Leeson week I'm going to call it.

Tuesday shows you in a powerful way what scaling in can do for your P/L. It started off with the usual 100k position, short in this case. Then was increased to 200k within 30 minutes to average down loss. 1hour and 30min after last increase I put out another 100k. 1 hour after that another 100k. Bought back the last 100k 10minutes later and sold again 20min later. Position 400k short. Then sold 100k. And three HOURS later sold another 200k - total 700k. Then bought back 100k. And finally covered 600k 50pips above my last sale. Wow.

This is text book example of good scaling tactics using patience and taking advantage of small corrective moves to take out a few pips. Except one VERY BIG caveat. When the position is going YOUR WAY you're supposed to do it like that. NOT when it's against you. Basically I've recreated what Nick Leeson did with those Nikkei and JGB Futs - pyramiding.

I can't believe I did that. I know why I did it though. I had had 3-4 experiences in last weeks when I had more or less correctly timed a 6-12 hour top area but it kept going 30-60pips against me before coming back. I thought it would happen again. It did in this case within 24 hours aswell but the pain of watching a loss grow by 2'000 USD in 5 minutes is really something. If I'd sat it out I'd have had a chance to get out with decent profit instead of huge loss. But that's not the lesson.

The point and lesson must be this. This should only be done when position is working FOR you. Never ever against you. I felt my adrenaline pumping as the price moved 10, then 20, then 30 pips from my last sale. I just hadn't prepared my mind for this. Then panic set in and the cover occured.

The one big positive I can leave this on: I didn't try and revenge trade and use size to quickly get me out of loss zone. I know I can get out of loss zone with time and reasonable risk. I don't need to bet 600k on a move and be correct. The last two days have shown: Never having more than 200k in a position I was able to be profitable to a decent extent. I've calculated that 15 good trading days could get me in the black again. I'm going to give myself 30 trading days though as it's improbable to have 100% success rate. There are going to be loosing days again. But they must stay small. The up days need to get bigger.