My Worst Forex Trade Ever—And Why I’m Glad It Happened

I’m sitting here thinking about what the first official article for Capitalist Nation should be.  So many topics to cover and issues I want to bring up. But what could be better and more exciting than talking about the biggest Forex mistake I have ever made? Trust me, you want to read this—especially if you’re just getting started in the world of currency trading.

The Why

So why in the world would I share my biggest mistake with the whole world? Shouldn’t I hide my mistakes so I look like Mr. 100% Right Trader all the time?

Actually, I believe that if you want to grow as a trader, you’ve got to do a couple things for starters:

1. You need to be honest with yourself.

2. You need to identify your own weaknesses and work to improve them and work around them if needed.

3. You need to come to grips with your mistakes. You need to learn from them.

4. You need to humble yourself. You’re not Gordon Gekko. You don’t need to be right all the time to improve your net worth.

One thing that helped me a lot was reading about the mistakes of others. Did I still do some of the same things? Sure. But, it’s great knowing I’m not alone. It keeps you going. So, I figured it was my turn to share something really, really stupid and how I overcame it.

The Setup

Okay, so there I am minding my own business kicking trades and taking pips. It was a day like any other day. At this time I was a short-term trader. I’d say most of my traders were intraday. Now and then I’d hold a trade for a day or a little longer if it decided to run, but I didn’t hold trades over the weekend.

It’s the middle of the month and I’m up about 28% on the month so far. At this point, I’m thinking of scaling back, but I’m feeling the market pretty well.

I’m about to catch a nice ride and I can feel it. The London market will be opening soon and I’ve got a setup going. The currency pair I’m trading has been going down a little bit recently and it should continue to go south. There’s news due out before the market opens and I think I have a handle on which way it’s going. And I figure if the market even hints at me being wrong, I’ll just exit out of my trade and walk away.

Unfortunately, I wasn’t anticipating what would happen next.

How to Lose When You’re Right

Wow. I’m laughing right now as I’m writing this, because I can still see this moment in my mind clearly. Sadly, here’s where the story takes a turn.

I was indeed right about the news and the market’s reaction. The currency pair went down fast. It’s all good right? Nope.

My first mistake was forgetting to take off a limit order I had put in earlier. Normally, I manage my points manually as I’m right there in front of the computer and I trust myself to execute. And if I fail to execute, then it’s a win because I discover a weakness I need to work on.

Anyway, the currency pair drops pips fast and bang, there goes my trade. It’s out the door at a small 30 pips profit. I know what you’re thinking right now. Ok Jason, you’re up 30 pips and sure, it could of been more, but that’s not really a big mistake. And you’d be right. But there’s much, much more.

My next mistake was forgetting that a long, long time ago in a galaxy far, far away I had put in a long order. I was thinking, at that time, that if the price went down to this point, I’d get in. See where this is going?

So I’m up 30 pips and now an order just got triggered. I was stunned for about 2 seconds. I quickly exited the trade. That two seconds costed me 22 pips. This thing was going down nicely.

I’m now slightly upset because I’ve lost out on a huge gain and wiped out most of the gain I did get. I had been waiting all day long to set this up right.

Sadly, this should of ended with me up a few pips and the closure of my trading program. It’s not good to trade when you’re not emotionally balanced.

Fighting Against Myself

As I’m taking this all in, the currency pair drops about 100 pips. For whatever dumb reason—probably because I’m mad at this point—I decide the break in the action means it’s leveled. Ready for this?

I take a good position on the long side. And yes, it went down about 40 pips right away. But then it stalled and I thought I’d average a bit, so I put in a second good position on the long side. Oh hang on, it’s going to get real good in a minute.

A few minutes later, I’m down a little more again. But, it looks like maybe the damage has been done. I’m beyond mad right now.

And it goes down some more . . .

That Sinking Feeling

For the next 90 minutes I watch as the market hacks little pieces out of my trades, 10 pips here, 5 there, 7 there, etc.

I should of just took it on the chin and got out, but thinking logically isn’t happening. Now I’m starting to get even angrier that I broke my rules and the blood is running through the streets. Hey, maybe it will come back right? I hope you’re laughing right now. If so, you see where this is going.

Madder than heck, I put in a stop loss order that will allow it to come down more, but I figured at least I have a shot to bounce back. And I put in another exit point in case it spiked up. I was willing to take a minor loss at this point. I just wanted some of my pips back.

I then shut down my computer and tried hard not to think about it (yeah, right). Somehow I managed to get to sleep—dreams of waking up with a nice damage reduction point hit.

Nope, I woke up and I was down about 240 pips in total. Was I still dreaming? I was just sitting there light a deer in headlights looking at the screen. Caught between sadness and rage, not sure what to do. There goes my month of earnings and I’m in dangerous territory. What do I do? Could it come back?

I scanned the Internet looking for anyone to tell me that a bottom was hit (even though I knew otherwise). Imagine working toward  10-20 pips a day and then blowing 240 pips instantly. What makes it even worse is I was right initially. If not for the stupid exit and forgotten long order, I’m heavy hitting the whole way down. I usually don’t go into the market looking for big swings, so this should of been like Christmas.

Thankfully, I made things right.

Owning Up, Paying Your Dues

Enough is enough. I sat there and just said to myself, “Suck it up Jason. It might take some time, but you’ll bounce back. Do what’s right and never let it happen again.”

I opened up my trading program again and winced as I closed out my positions. I believe the exact pip loss was 242—I still wince when I think about it.

I looked at my account and just decided that I would never, ever do something like this. I would never “hope” something turned around. I would never risk so much on a trade. I would never put a possible order in for more than a couple hours into the future. I’d be more focused about my automated exits and leave myself notes if I put one in so I wouldn’t forget when I came back.

Next, I blew all of this out of my mind and analyzed the the currency pair from a fresh perspective. Was it going up, down or sideways? I believed that it would go down more, so I shorted it.

And I was right. Even with tight stops and a “no wiggle room” policy, I got away from a bad situation and got back to business. Within a day I managed to “get back” 25% of what was lost. And despite the possibility for more pips in my pocket after that, I walked away from trading to take a break. I did take a peek and my short trade would have produced another 30 pips, but whatever. It’s about the marathon.

I ended the trading day on a positive note. It no longer mattered that I had lost 242 pips in a disastrous moment in my trading life. What mattered is I had learned from it and moved on.

Hopefully, my story will help you out in some way. I visit a lot of forums out there and see many traders trying to hold onto their losing positions with the hope that they will turn. Be honest with yourself. If you’re wrong, get out. It’s only a big deal to be wrong if you let it be a big deal.

My worst trade ever has been far more valuable than the 242 pips lost.