I’ve taken a screen shot of my Aussie trades recently where I made an error and quickly converted it into a winning trade.
Normally on a Friday I’d take advantage of a measurable pre-weekend short covering rally. It’s been my experience over the years that speculators don’t like to be short a currency over the weekend. What this usually means is a short covering rally ahead of that Friday August 16th close.
Old habits die hard, so when I saw the possible start to the short covering rally at roughly 10:00 Pacific, I went long at 74155.
My long entry was based on ‘time of day’, Friday’s anticipated short covering, and a technical bounce off my normal EMA. Keyword ‘anticipated’ but not confirmed!
This proved within 4 subsequent bars on the 3 minute chart to be an incorrect interpretation of the facts! That’s tough to admit. Reversing the position is even harder.
So I took a $10. profit and reversed to short at 74145 about 15 minutes later realizing my expectations for a Friday rally were NOT going to happen.
That’s a quick mental change of heart, a quick acknowledgement of what the chart is telling me and that I’d been wrong. While I got a little nervous about a half hour later when the Aussie had a quick run up, I stuck it out and rode that baby all the way down to cover at 73970.
Several good lessons… believe in the indicators even though your experience gives you preconceived ideas and more importantly, accept when you’re wrong… early and quickly. It can add profits you did NOT expect. More Importantly, keep you away from the pain of a loss.