Distraction Destruction

This week Kathy and I wanted to trade the MPC meeting notes in our private BK signal service. Normally we do not trade central bank meetings because they can be notoriously difficult to predict. However, this time we were pretty confident that the tone of the MPC minutes would be dovish especially since uber hawk Andrew Sentance was no longer on the committee.

Unfortunately this was also the day of the fateful Greek Parliament midnight confidence vote for the government of George Papandreou. In between fielding calls from the media, watching the quote screens and updating research we simply got too distracted. We waited then wavered and finally decided to pass on the trade which in the end turned out to be a clean winner.

Distraction is the bane of traders existence because it affects the single most important function of the job -- focus. Yet, as annoying as the miss of the pound trade was, what happened to me at the end of this week was even worse. I was trading live in our private BK member room and we had done very well nailing the positive price action in the post IFO morning European trade.

I was happy to have made money for our subscribers, but as result of doing the webinar and then writing research I lost focus of the price action and missed several key set ups for my own account. Instead of accepting the fact that I simply couldn’t do everything at once, I forced a trade in the EUR/USD which turned out to be the top tick of the upmove.

Normally, I would have just shrugged off the bad beat (after all I get stopped out almost every day). This time however, the deadly combination of distraction and frustration sent me into a massive spiral of destructive trading. I did everything that a good trader should not do. I fought the tape, I doubled down on the position and ultimately I dug myself into a much deeper hole in my account.

There was only one thing to do at that point. I had to get out of all my positions. It didn’t matter where the market was going, It didn’t matter what the newswires said. It didn’t matter what the price action was doing. The only thing that mattered was that I had lost control and the only way to regain it was to get flat quickly.

I took a nasty hit on Friday that cost me most of my week’s profits, but surprisingly enough I was not mad. My set ups were still sound ( and in fact if I had just stuck to them I would have been positive on the day). More importantly I learned about the insidious danger of distraction and that lesson was worth a lot more than a few bad trades.

Professional traders always say that while we cannot control the market, we can control our reaction to it. As trite as that sounds it is true. If the market does not have our full attention, if we are distracted by something else, the only course of action is to do nothing.

Boris Schlossberg

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