Wow, what a painfully slow way to start the week. As traders we shouldn't have really been surprised bit it though. There was no major news scheduled on the day, the pre-market was very weak, and the initial moments at the market open proved rather uneventful. All of this means that a trader better be ready with some patience and discipline as it's likely to be a slow ride early on.
My initial long was a little frustrating because I was probably too patient in waiting for a movement higher that never came. I had hoped to take some profit of at least a few ticks when we failed at 1544.75 the final time but unfortunately I was unable to get filled and I had no real choice but to take a break-even on the trade. We're not usually fans of break-even trades here at Samurai Trading Academy but it was the right decision here as the subsequent price action showed.
Why are break-even trades sometimes not a good thing? Because in working with traders in the past I've found they often hurt their long term results when they are too quick to move to break-even on a regular basis. Usually a trade needs a bit of room to "breathe" so unless you're very confident that your original setup is invalidated, a move to break-even is often a poor choice.
Novice traders are always extremely proud of their break-even trades. Veterans know that there is nothing wrong with a small loss if the expectancy on the trade is good over a larger sample.
Remember what I was saying right from the start of this trading recap about needing patience and discipline? Well, right after the long that didn't work out I suddenly became impatient for a trade and made a very bad trading decision. This short was NOT a valid trade according to the rules and should have been avoided entirely.
I'm not afraid to say I made a mistake - sometimes it happens no matter how much trading experience you have. The various emotional tugs of fear, greed, boredom, excitement, and many more are even present. I lost focus briefly due to how slow the market was and decided to do something very aggressive that I instantly regretted.
The key take-away is that I quickly realized my mistake and took action to remedy it and move on.
Many traders run into serious trouble when they make errors like this. They know they shouldn't have taken the trade but they don't want to accept the loss right away because somehow this confirmation makes them feel even worse. So instead they aim for a break-even trade only to see the position move further and further away from them. Suddenly what was just a minor error becomes a huge problem. We use tight stops (5 ticks) here at STA for every single trade so our risk is very limited, but I have seen some foolish traders with poor risk control where this sort of small mistake grows until it actually blows up an account. It sounds crazy, but many people are more afraid to admit that small mistake than to just lose it all and start over. Don't be that type of trader. If you make a mistake then take action to quickly correct it (loss or not) and then move on. There are better trades out there.
Those better trades soon came as we had a couple of ideal longs that finally began to get the market moving. The first trade was a 2 point target and based on the structure of the market and how slow things had been I had little interest in a more aggressive hold. I left a point and a half on the table but the conservative exit was a choice I felt more confident in and that's what counts.
Our final long was picture-perfect and I had hoped that would mean we would finally see some real action and a nice run. While things started well they slowed rather quickly and with the 1550 area looking protected I again took my profits. It had already been a long day thanks to that slow start so this seemed the perfect time to wrap things up.
Hope you all had a great trading day. Hopefully you held your discipline a bit better than I did!
Reflections for the Warrior Trader
- What sort of things can a trader do in the middle of a slow trading day to quickly boost their patience and discipline?
- Should a stop-out be the point where you admit you've made a mistake or is waiting for this outcome just an excuse to avoid a difficult trading decision right away?