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?
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.


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.