I had been thinking about my recent short in Micro AUD/USD Mar25 (M6AH5). I had steadily added to my position as the Aussie dollar trended nicely lower.

Five days ago, the Washington Post reported that Trump’s aides were exploring a narrower tariff plan than expected. This caused the AUD to strengthen abruptly. Unfortunately, the price hit my stop and I was stopped out.

A profitable position had turned into a loss. While I was not feeling downright miserable, I was certainly dejected. This was especially since Donald Trump had refuted the report, and the AUD started its slide again.

Nonetheless, I have to put this loss in perspective – the article could have well been accurate, and the Aussie dollar continues its ascent in the alternate scenario. Had I not have the stop in place, I would have lost much more.

Unexpected twists can and do occur. It is par for the course when it comes to trading the market. Further, I had to reset my mind and start a fresh short position again as my system gave the SELL signal, which I dutifully complied (see grey text on chart).

So the lesson here is: always expect the unexpected, and manage your risk well.

TMT

Two pieces of news caught my attention recently:

News: More than 2,000 S’pore investors lost over US$10m in MLM forex scheme, 2 M’sians jailed and fined
News: Jail for man who ran S$5 million Ponzi scheme while posing as ‘successful’ forex trader

I feel sorry for the investors who had lost their money. I’m not sure why they had trusted the scammers. Perhaps in the low interest rate environment, a forex trader who promises returns as high as 13 per cent seems too good an opportunity to pass over.

If those investors have tried trading themselves, they will realize the depth of the challenge. The reality is unlike the click-bait titles that we see on YouTube:

“Turning $1,000 Into $10,000 In ONLY 3 Forex Trades LIVE”
“How to Make $100 per day trading forex”
“How to Make $500 a Day with Forex Trading (3 simple steps)”

I have read how successful traders take years to hone their craft. I’m under no illusion that if I am to survive (and thrive), I will need to pay my dues too. Moreover, trading means dealing with probabilistic outcomes. Even when one has done everything right – right entry price with stop-loss, right position size, right timing – there is no guarantee of a sure-win.

When someone tells you otherwise, walk away.

TMT

There is a verse in Rudyard Kipling’s poem “If” that I find particularly meaningful:

If you can meet with Triumph and Disaster
    And treat those two impostors just the same;   

Replace Triumph and Disaster with Wins and Losses, and the verse speaks to me of the ideal trader mindset:

If you can meet with Wins and Losses
    And treat those two impostors just the same;   

When we have a winning trade, we feel happy. Proud even, that we have made the right call. But I argue this is not the right emotion. In fact, we should not have any emotion involved. It is better to bring our hearts back to a neutral state, so that we can focus on our trading process for the next trade.

Likewise, when we have a losing trade – or a streak of losing trades – we feel sad. Possibly angry. But it is not the right emotion either. It is better to let the feeling and raging hormones dissipate, so that we will be in the right frame of mind to execute our next trade with clarity.

The next trade should NOT be encumbered by the last winning/losing trade.

If we can face our wins and losses with subdued emotion and we acquire the mindset that wins and losses are nothing more than probability events in trading, we will become better (and profitable) traders over the long run.

TMT