When you are on a roll in trading, it is easy to feel euphoric. Sometimes it can be hard to feel as if you could ever take a loss. However, losses, are just as much apart of trading as the profits. If you ever hear a trader has never taken a loss, it is time to put on your skeptical hippo eyes. If the trader who never took a loss started to take a loss in a trade, do they have a exit in their trading plan to follow or would their emotions take over? Understanding how to deal with losses in your account is a great way to know you are getting the full education and experience of trading. Here a couple things to keep in mind when you are experiencing losses in your account:
Are you over investing? This is a great question to ask yourself if you start to feel emotional about your losses. When you have the proper Risk tolerance setup in your account, then you should never be heartbroken after taking a loss. The amount of capital that you put into that trade on entry should be something you are completely okay with losing if the trade moved against you. It is easy to pile on contracts when you are on a winning streak, but when you experience a loss on a huge number of contracts, it will feel as if you are sinking the Titanic in your account. If this is what you are feeling, then you probably over invested. Even if you are on a winning streak, stay within your Risk tolerance, that way when a losing trade appears, you are still within your tolerance for your account.
Have a trading plan! This can be a great way to keep your emotions out of your trade and gives you a plan on what to do when you start to see a loss occur in your account. What does your trading plan say? Do you have a resistance level to get out at, or an overall percent loss on the trade that you are willing to take before closing out? Whatever you have for your trading plan and account, it is always a good idea to stick with it. After a month of trading you can look back and see if there is anything about your trading plan you want to tweak if you felt like you were experiencing too many losses. Perhaps the strategies you were using were not best for the current market? Maybe your exits were a little too high for the movement in price, or perhaps you were getting in on late entries. Going back and assessing your plan is a great way to understand what might be happening with your trading in your account and it allows you to get back on track for the next month.
Remember, DO NOT beat yourself up when you take a losing trade. It is easy to weigh yourself down in negative thoughts if you have a few trades that are not able to lock in profits. However, getting into this mindset can cause a descending spiral as you let your emotions guide your trading rather than the charts or your trading plan. When emotions guide your trading, more than likely you will continue to find losing trades. This is because you are finding yourself hoping for a move rather than following the charts. So if you find yourself with this mindset, take a day or two away from the market, refresh your emotions and mindset, and then get back in there sticking to your trading plan!
Bruce — We have had an amazing move off of last week’s SPX 2594 low. We moved over 135 SPX points in a week, and this time up, not down. It is looking like this last low is holding, so we should see higher levels from here. I am bullish, however, I do think the 2750 level may present a hurdle and we may consolidate before moving too much higher above that level. As we know, we take it day by day and level by level, so I am still trading with caution and will start to hedge with small to average size at 2750.
Have a great weekend and don’t forget Mother’s Day!
Carolyn — I’m a cautious bull in the SPX…….We are very close to the upside target that I’m looking for and also have some time resistance to the current rally. If we do get a pullback I’m going to look for new buy entries if the market allows it! My bigger picture work says there is potential to the 2965 handle on the upside.
Henry — As I think about a theme in my trading for this week, I think it’s somewhere between finding honey badger stocks, and trying to stay focused on a few core picks. I’ve had some trades in HD, WYNN, CMG that all trade fair enough, but my real swings have come from names like LULU FSLR and more recently COST. These are stocks I’ve picked in the past few weeks that I’ve really tried to have some risk on with, and generally speaking that’s worked out well. NVDA might fall into this too as we traded it Tuesday into Wednesday, Wednesday into Thursday, and were able to find a couple good spots to sell premium for the actual report. Next week monthly expiration will be in focus and I’d love to see a big gap higher on Monday that I could sell into, then look for choppy markets into Friday.
Darrell — Coming soon: A newer and better way to access your Simpler Trading resources on the go! Our current app, available in the App Store and Play Store for your iOS and Android devices, already makes your chat room access easier. But our new upcoming app will add in some exciting features. We’re going to be releasing a beta in the coming weeks that will allow you to log in once and instantly have access to your Simpler Trading suite of resources, like any chat rooms, premium daily videos, or webinars. We’re also adding in easy and fast alerts that will enable you to click and review without needing to log into a room first, and dynamically send you instant push alerts from whichever services you’re an active member of. The new app is also going to make you dinner and bring you a drink when you’ve had a rough day. (Ok, the last one might be false). Stay tuned for more info in the next week or two!
Henry Gambell says:
See the original setup HERE
Expert: Henry Gambell
Setup: Setup on IWM
Update from Henry: IWM was a few pennies from targets in just 5 days, and since it’s a vertical instead of directional, I’m giving it a few more days to try and make the new high