A Little Trading Story
I got an email from Trading Markets yesterday. As you may be aware, I have been contributing commentary and analysis to their site for some time now. I guess they’ve got a new project they’re working on, and they asked me to write up a few articles to help get it launched. I happily obliged. One of the subjects was “My Worst Trading Mistake”. I figured the story I submitted had some educational value, so I’m posting it here as well.
This falls under the category of pure stupidity.
Once upon a time I opened my first futures trading account. I put in $5000 which I had saved up. It was a very exciting, and more than a little scary. From a knowledge perspective, and from a price movement point of view, I totally understood what I was getting in to.
Actually pulling the trigger, though, is a completely different story.
I had traded stocks for years. The futures account was my first foray in to leveraged trading. In stocks, while there is certainly the risk of taking a substantial loss, it generally isn’t going to happen nearly as quickly as can sometimes be the case in futures. That thought was what had my knees shaking as I made my first foray in to the market.
As it turns out, I was right to be afraid.
My very first trade was in Japanese Yen futures. I can’t recall the specifics about the analysis that went in to the trade, or even if I was going long or short. I do remember fighting the anxiety for a long time before I actually finally pulled the trigger.
Let me back step a little. I am talking here about a time when online futures trading platforms were just in their infancy. There wasn’t any real electronic trading. You weren’t doing much more than using the internet to submit an order to your broker’s desk just like you would do calling them. The process was slow and getting your fills took forever by today’s standards.
My first trade wasn’t going my way after some period of time, so I went in to close out the position. The problem was, however, that I accidentally doubled up my position instead. By the time I caught the mistake, it was too late.
When the dust settled, I was down something like $4000, a hit of 80% on my account value in a matter of hours. I was literally sick to my stomach. My coworkers must have thought someone died. I’m sure I looked that bad. I’ll always remember that feeling.
Can I say that I’ve never messed up an order entry since that time? Definitely not. It’s been infrequent at best, though, and I’ve certainly never taken a hit like that one since. Remembering those feelings is likely to keep me from ever bungling things like that again!
Now please don’t take this as any kind of comment against the futures market. After this particular little set-back, I regrouped and came back with a vengence. When I recoverd and got back in to the market it was a MUCH different story!
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