Learning from mistakes works

Daily Result: £613.42

Discipline, trade stop losses, the importance of taking a red, learning from mistakes. Whatever you want to call it today was a perfect example of why it all works. And why as traders we should all do it.

My last cricket loss was £419.97 on the England v South Africa match. I discussed this loss in detail. The outcome was I'd made a basic error. I'd let a loss on an early trade run too long. Didn't cut it in time. And as the market continued to move against me it left me in a tough position for the rest of the match. Unable, infact, to do any more than limit my losses on the game. Hindsight is a wonderful thing but in discussing that loss I said with hindsight I'd reviewed my trading performance, identified the mistake and would learn from it.

Today the pay off came. Because I found myself in the same basic position and once again it was very early in an event. This time, bearing the recent loss in mind and taking all match factors into account, I made an immediate decision to cut my losses. Accept the all round red it left me with and start again. A wise move. Because in less than 10 minutes I'd have been screwed. And within 25 I'd have been facing catastrophic losses. Though my stop loss limit would have forced me out of the market long before that. Instead I learned from an earlier mistake. Cut the loss, took the all red position and was then able to use the subsequent events to turn what would have been a very heavy loss into a very healthy win. Like I said, discipline, stops, taking red and learning from mistakes. Package it together and it works. Taking a red really can be good!

So, what exactly happened today?

Well, I was trading the Australia v South Africa semi final in the Cricket World Cup. South Africa won the toss and decided to bat. The considered wisdom was the they should post a good total on a track that would slow during the day making it harder to chase. As the game got going I had a large back of South Africa sat in my book. I did take some early profit from this but also added to my position as the first few overs progressed. Little did I know what was to come.

Crunch time came in the third over when Smith was clean bowled by Bracken. The market moved against me and I was effectively in the same postion as back in that West Indies v England game. My options? Take the loss. Or hang on, hope there wasn't another quick wicket, and get out a little later, hopefully for a profit. Smith's is a big wicket. And working it out, bailing there and then only left me £75 red each side with nearly 100 overs left to turn that round. Another wicket now and I'd be facing a considerably larger red. Which, given the shortness of the Australian price already, would have been tough to turn around. I bailed. Took the £75 red and started again.

And am I pleased I did that or what! Kallis, another huge wicket, fell in the 6th over. And before 10 overs had been bowled South Africa had collapsed to 27/5 amid astonishing scenes. Australia had traded at 1.04 and the match was effectively over bar a miracle. During the fall of those other four wickets, instead of staring at an increasingly red screen like I would I have done if I had not bailed I turned my £75 red into a green on the fall of Kallis's wicket and managed to build a substantial green on Australia as the other wickets fell.

So effectively less than 7 overs of cricket at the start of a match could have resulted in a maximum loss or a healthy win. Learning from previous mistakes I was lucky enough to have the win rather than the loss. And in the process reminded myself again why taking an all red position isn't necessarily a bad thing. In today's case it saved me a small fortune. And will do again in the future.

Anyway, sorry if that's all a bit long but I think it's important. And by typing it all out at least I'm not going to forget it in a hurry!! :-) After saying I'd felt tired and lacking in concentration while trading recently I again felt better today after taking that short break though there wasn't exactly that much to do after the first 10 overs. However, I've decided to take the next two days off too until the Cricket World Cup final, ignore the tennis and snooker, and freshen up a little more. Good luck if you get involved.