Tuesday, June 20, 2006

Giving it back in the afternoon

Yes it happens and it might be a sign, that you are no longer focused. So try to analyze your losing trades on the fly:
- Did you follow your plan?
- Did you have a signal to enter?
- Did you execute your Stops following your Stoploss routine?
Yes?
Take a short break, clear your head and continue trading.

What I noticed in my recent trading, which is much more dangerous than a losing trade, is a Breakeven trade. A trade which went against you, but did not hit your Stop, then came back and you, according to your rules take the offered exit at Breakeven plus 1 tick. But instead of being the Last Chance Exit, your entry was just early and the contract continues without looking back, giving you no second retracement to board the train again without chasing the trade.
Now you call yourself names, why someone can be so stupid not to see, that this move would continue, that it would go another 20, 30 or 40 ticks. Do that twice in a row and you have all the ingredients for some sloppy dangerous and reckless trading right in your hands.

STOP TRADING

Your rules are sound, the Last Chance Exit has proven it's value countless times. Just because today it was not a Last Chance Exit, but the contract went on, does not mean the rule is bad.
Next time you ignore especially this rule it will cost you dearly. It's the way the market works. Get you sloppy, complacent and then go in for the kill.

1 comment:

DrFox said...

Dear Globetrader,

First congratulations for yesterday game. Germany played very well.

I am Brazilian, so it might happen that our teams fece up at the final match. :)

Regarding your post, I agree 100%, people are taken by fear when the trade go against the forecasts and try to exit soon than necessary.

In my view, we are to expect some trades we enter to get down a little bit before going up and the reason is that it is too difficult to find the botton point of the reversal where we wish to enter.

So, the breakeven point was supposed to be a great achievement and instead of being an exit point, it is the exact oposity.

If you breakeven a trade, and strategy allow you to raise your stop according, it means that you are already a winner.

Just be a little more patient, double check if the conditions are still valid and once it goes up again, raise your stop to protect your capital.

From there, let the winners go up until they get tired.

I know. It is easy to say, but hard to do, anyhow I have been doing it for a while and already built the confidence necessary to pass it.

ps: Sorry for the long comment. :)