Do you ever remember any of your trading dreams? ¬†Or any of your regular dreams?
What typically happens to me is that I may have a dream, and when I wake up, the memory of the dream starts fading rapidly. ¬†If I don’t remind myself of the details or write it down, it is gone within less than ten or twenty seconds or so. ¬†There are some dreams that I can remember for longer, but for the most part, within half a minute, the memory is gone.
Bill Lipschutz Trading Dream
Bill Lipschutz, from the book The New Market Wizards talks about a dream that he had about trading:
“On one particular occasion, I had a very specific dream the night before a balance-of-trade number was to be released. ¬†I dreamt that the trade figure would be a specific number; the revision would be a specific number; the dollar would move up to a certain level, and I would buy dollars; the dollar would move up to a second level, and I would buy more dollars; the dollar would move up to a third level, and I would buy yet again; the dollar would move up to a fourth level, and I would want to sell but would buy again.
The next day, the trade number came out, and it was exactly the same as in my dream. ¬†The revision was also exactly the same number. ¬†Even the price sequence was exactly the same as in my dream. ¬†The only difference was that I didn’t trade at all.”
Freaky dream predicting the exact economic numbers and what the market would do, don’t you think?
Usually, if I can anticipate such things, it is in a more fully conscious state, and not during sleep.
How I Blew My Trading Account – In My Dream
Most of the¬†dreams I have don’t make any sense and I don’t have time to record them. ¬†Trading specific dreams are even more rare. But, on this occasion, somehow I was able to remember it and write down the details of what I believe happened in my dream.
The dream I had many years ago is as follows:
I dreamed that USD/JPY was trading around 110.00, then suddenly, it collapsed lower down into the 70.00’s.
The collapse I felt was more due to lack of liquidity, rather than a macro driver. ¬†So I naturally wanted to fade it.
I bought my first position in the 70’s. ¬†Since I thought the macro was still bullish, I went long 100% of my equity. ¬†So leveraged 1:1 long USD/JPY somewhere in the 70.00’s.
Then the price kept dropping down to the 30.00’s. And again I thought it was such a bargain, so I bought more.
Then the price dropped down to 17.00! ¬†I bought again.
Priced then dropped down to 3.00
Then I got a margin call and lost all my money.
The market was thin, illiquid, and finding any bid or offer was very difficult. ¬†Sometimes there was no quote.
This all happened within one hour in my dream. ¬†Very scary and weird indeed.
Can you imagine USD/JPY dropping suddenly from 110.00, down to 30.00, then down to 17.00, then down to 3.00? ¬†All within one hour? ¬†But that is what happened in my dream.
Has anything remotely close happened in my own trading? ¬†No.
The EUR/CHF did experience a version of such a big drop, with the market being thin and illiquid after the SNB stopped defending the 1.20 floor. ¬†EUR/CHF dropped from 1.2000 down to 0.8500 or so very quickly.
The insight here is: there was no macro reason to be long EUR/CHF from 1.2000. ¬†The SNB defending the peg was not a good enough reason to be long. ¬†You have to have a reason to expect the market to rally sufficiently from 1.2000, so the reward risk ratio becomes acceptable. ¬†If you don’t have such a good reason, then you don’t go long from 1.2000, no matter how much money the SNB is defending it with. ¬†(especially with so many other markets making amazing moves)
That prospect for the trade to move into your favor, that prospect for capital appreciation and your reasons for it, is so crucial.
Have you had any trading dreams you would like to share? ¬†If so, comment below.
P.S. ¬†If you would like the trading strategies that that can make it easier for you to get started deciphering the powerful and lucrative global macro elements in trading behind the recent market moves, then click here.