Emini Day Trading Lessons: -3 Points – It’s Okay to Take a Loss!
Here's something you don't see traders post very often - an actual losing day! While a lot of people try to dance around it the reality is that as a trader you will have losing trades and sometimes you will even have days where you ultimately end up a few points in the red. It's pretty much inevitable unless you're trading dozens of times a day to ensure your edge plays out.
By itself a losing day isn't necessarily anything to get upset about. You can trade exceptionally well and do everything according to your plan and some days the cards just don't go your way. That's all part of operating on probabilities and even trading strategies that win 90%+ of the time can string a few losses together.
The thing to keep in mind however is that if you know your edge is strong and will continue to play out in the future then there's nothing wrong with that single day's outcome. That's why I evaluate my performance based on if I followed my trading plan and how well I managed my trades rather than the end result. I know if I focus on the process then the results are inevitable, even if they might be elusive for a day.
A Look at the Process
While I did trade a bit more aggressively today than usual I can look back on this chart and I know that I took good trades. I'm happy with my trading performance because I stuck to my plan. But how can I say I'm fine with the result when I took three losses?
It's because I consider a trade to be a good one as long as it fits my rules and I manage the trade well. If I take good trades over and over then that means I performed well even if the numbers don't show it on this small of a sample size.
All three of these trades would have a good expectancy if taken 50+ times and that's what matters in the end. A good trade can result in a win or a loss but what makes it good is that it will pay you far more than it takes away over time.
What I will admit is that the first two trades were a bit riskier and lower expectancy overall due to the market being largely sideways and because of the supply they were testing. I knew those risks before going in which usually means I will just manage the trades a bit more tightly.
In most cases that means taking smaller wins or losses off the table if things don't follow through but I didn't get much of a chance to manage the first long. Not a big deal - it happens.
Calling It a Day
This kind of outcome for a trading day doesn't happen to me often but if things aren't going my way it's important to know when to call it quits. In my case that's either when I'm down ~4 points or if I end up taking a few losses in a row like today. Having this kind of firm rule in place is absolutely crucial to long-term trading survival.
To use the poker term, it keeps a trader from going "on tilt" as they become more emotional from taking losses and then throw their rules out the window. This usually leads to a rush of revenge trading or a complete lack of risk control with a emotional downward spiral and loss of equity as the likely result.
Even if you're not particularly emotional about your trades or have learnt to control them from years in the markets, there's still a good reason to wrap things up if you take more than just a loss or two.
If a competent trader is stringing together losses it often has less to do with the individual or their plan and more to do with the type of market environment they're in. Sometimes the market just enters a phase where it moves erratically in whipsaws and other times it doesn't respect normal technical levels. If that's happening then it's usually best to call it a day and come back tomorrow both mentally refreshed and with a new market environment to work with.
It doesn't really matter to me at this stage if the market has some fantastic moves in the afternoon and I miss out. I'm done for the day. Period. I have a plan in place and I follow it every single day.
That's why I've been doing this for a long time and why I'll still be around years from now. And if I'm thinking that far out, why do I really care about the outcome of a single day?
- Strike While The Iron is Hot - March 1, 2021
- The Path to Becoming a Full Time Trader - February 22, 2021
- Looking to 2021 and Beyond - January 20, 2021
