SCOTT WELSH TRADING BLOG

The Biggest Trading Mistake I Ever Made

The Biggest Trading Mistake I Ever Made

Mar. 20, 2019

Mistakes are valuable.

They’re not failures.

Mistakes are the feedback we need to reach our potential.

Well, not in this case.

In this case, it cost me a lot of money.

Back in 2014, I decided to stop being so conservative.

I’d been testing this particular system, the Hornet, for two years and it was time to go. After over 2,000 hours of backtesting and many more hours of watching it trade live, there were no more excuses.

It was time to see what it could do.

So I put the Hornet on the USDJPY 15M chart in a $2,000 account. The research showed I could possibly get 50% in a year if I was willing to trade the largest trade size my U.S. margin requirements would allow.

The live experiment began in May 2014.

And it went horribly right off the bat.

After a couple of tiny winners, it went immediately into a drawdown over 20%. This wasn’t out of line with historical testing, but it was depressing to be down that much only two months into it.

I stuck to my guns, and it paid off.

The next three months were nicely profitable and five months in I was up about 60%. I was very interested in stopping then, but I promised myself to do it for a year.

I kept going.

Which, of course, meant another drawdown was coming. October and November were negative but not too bad.

Then it got really good.

December through March was incredible. It was so good, I even felt bold enough to increase my trade size.

The hot streak stayed hot, and I actually hit the 100% return level while speaking at one of Rob Booker’s live events.

I’d made 100% in almost exactly one year. Everything had not only gone according to plan, it had exceeded the plan.

Everything should have been great. And it was.

For about a minute.

As soon as I hit the 100% mark, my brain kept telling me to stop. It wanted me to take the money and run. I’d won.

I didn’t want to lose what I had.

Guess what happened next?

I started to lose what I had.

May and June were barely profitable, and then July hammered me with a big down month.

I tried to carry on, and August was okay.

Then September hit.

I had a loser and then another and the account size started to fall rapidly. I’d been over 100% and now I’d fallen down to around 70%.

After one more losing trade, I’d had enough. I pulled the plug. I stopped trading.

I took my gains and went home.

At first, I thought I was a genius. The losing streak continued after I bailed and September ended up being one of the worst losing months in years. And then October was a loser and November was a loser.

If I had stayed in, I would have seen my 100% gain fall all the way down to a 16% gain. It seemed like I dodged a bullet.

After riding this roller coaster, I went back to testing. I stayed out of the market for a long time. After finding new Inputs, I then sporadically traded the Hornet on and off in various iterations. Finally, many months later, I started trading the new version regularly again.

I never went back to the settings that had doubled my account in 12 months.

I was too scared.

It was a huge mistake.

From December 2015 to February 2019, the original Hornet I traded would’ve made 150%.

If I had just kept going instead of losing all those months while I traded nothing (or traded too small), I would have a lot more money right now. It’s something I’ll always regret.

So the moral of the story is: don’t trade a system if you don’t trust it. And if you trust it, trade it! No stopping, no getting scared.

Traders who are only halfway in get squish just like grape.

I’ll probably never get over all the money I lost by jumping ship when things got tough.

Don’t make the same mistake I did.

We’ll look at a different system in our next email.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.