Is it suicidal to catch a falling knife?
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No traders in the right frame of mind enjoy a round of losses. The monetary loss is one thing but the fact that they are proven wrong can be a fatal mistake. That is when emotions run over the head work and attempt to take revenge on the market.
Yes, it is painful to take a loss and move on and yet it is even more painful if your losses is exacerbated with continuous falling in prices, like Natural Gas now.
Trying to find out the underlying reasons is secondary compared to the immediate action that a trader needs to do. AMPUTATE the part that has been poisoned by the snake or CUT LOSS as traders would commonly say.
The price action appears to head further south towards the last level of support from 1.629 to 1.902. This is where it was the lowest in Mar 2016. If it breaks below 1.629, then a new historical low record will be set for Natural Gas.
As reiterated before, having a Stop Loss in place takes out the emotions that a human trader possess, wanting to prove himself right, his strategy is robust and refused to give in to the market. The results - more losses which may result in overtrading to compensate the losses or affect his judgement in other trade setups. Why lose a tree for an entire forest?
Then again, humans are such interesting beings, stubborn and headstrong, the need to be right, to be perfect is stronger and also suicidal.
Avoid such mistakes at all costs and look upon cutting losses as a business operating costs. Take it in good stride and the Market when turn around will give you another chance. Aiming for a 100% no loss trading policy is not the way to winning.....
Trade safely, always use a SL , adopt appropriate risk and capital management. GBU
Yes, it is painful to take a loss and move on and yet it is even more painful if your losses is exacerbated with continuous falling in prices, like Natural Gas now.
Trying to find out the underlying reasons is secondary compared to the immediate action that a trader needs to do. AMPUTATE the part that has been poisoned by the snake or CUT LOSS as traders would commonly say.
The price action appears to head further south towards the last level of support from 1.629 to 1.902. This is where it was the lowest in Mar 2016. If it breaks below 1.629, then a new historical low record will be set for Natural Gas.
As reiterated before, having a Stop Loss in place takes out the emotions that a human trader possess, wanting to prove himself right, his strategy is robust and refused to give in to the market. The results - more losses which may result in overtrading to compensate the losses or affect his judgement in other trade setups. Why lose a tree for an entire forest?
Then again, humans are such interesting beings, stubborn and headstrong, the need to be right, to be perfect is stronger and also suicidal.
Avoid such mistakes at all costs and look upon cutting losses as a business operating costs. Take it in good stride and the Market when turn around will give you another chance. Aiming for a 100% no loss trading policy is not the way to winning.....
Trade safely, always use a SL , adopt appropriate risk and capital management. GBU
Note
As you can see, a week later, the price has broken down the support level at 1.902 and is now heading towards 1.629. The danger of buying at all time low is to be proven wrong that the previous low is the support (possibly but not always) and there will be a rebound. We need to exercise a bit more patience. Like I say, buying is easy with a click of a mouse but if you have to stare at your portfolio with a sea of red daily, that will do some damage to your mental mind and sooner or later, one will do things irrationally such as cutting losses (forgetting why make the purchase in the first place).
Note
You can see how slow it is and why there is no need to panic and rush to buy if you let the desired price comes to you with the trend line acting as a guide. It is now in the support zone , so no action taken till it breaks out or down.Note
Watch closely now, it has a 5% jump last night. The price is now at 1.941Note
Perhaps, now I can relate to some traders reluctance to use Trend Line analysis. It is SLOW moving as you can see from above chart. So long as the price action does not break out of the bearish trend line, you do nothing. Thus , many traders like to trade intraday in hours and minutes as it is more exciting and a promise to make money (more i dunno). As I have said before, trend line analysis does not get you the first bite of the cherry be it top or bottom but it helps you to have a firm bite on the remaining cherry (the majority) so long the trend stays intact.Note
Just as we thought NG has seen its darkest days and about to reverse, it did a 360 turn and continue to head down.....
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