Remember what I talked about in some of the recent Trading Journal posts about summer markets being hot and cold and opportunity being somewhat inconsistent? Well, here's a cold dose of trading reality. The truth is that as a trader you will take losses. You will also have losing days. You're going to have to get used to not being "right" all the time.
Even if you have a solid trading edge and know that you're trading with a positive expectancy sometimes the cards won't go your way. You can have a winning percentage of 80% or higher and still have a bit of bad luck and string a few losses together in a row. It's unlikely, but it can and will happen if you're trading long enough.
A Little Bit of Chop
So when I have a day like today where overall I take a small loss it's not really much reason for concern. It happens sometimes. The key element though is that I kept the loss small. I also had planned to stop trading for the day had the third trade not worked out which would have kept any losses contained to just a handful of points. Most long-term professionals in this business will tell you that risk control is the most important part of being successful over time. It's not really a focus on maximising profits, rather it's protecting what you have first and foremost which matters.
In the end after costs and fees I'm really only down a couple of ticks so it's not like a poor day like this is hard to recover from. It's just one good trade away from being in the black and with a bit more luck a day like this can be +5 or more points instead of being around break-even.
Even things shaking out just a bit differently on the third trade (second long) could have made for a decent profit on the day as I had that target in place and didn't miss by much. On most days I will still get a profit of more than 2 points here if it stalls but in this case some rapid selling came in quickly and there were few management options. C'est la vie.
Consider the Sample Size
I don't worry too much about that though. I think of situations like this in terms of samples of 30, 50 or even 100 similar trading situations. Where it didn't work out here and I gave some profit back, in most cases I will hit my target for ~4 points or at least be able to get something greater than 2 points off the table. No reason to get bothered by this one that didn't quite go my way just like there's no reason to get upset that the overall day didn't play out as I ideally would have liked.
After all, this is just three trades on a relatively quiet summer day. Is that really enough trades and a big enough sample to see anything statistically significant from the results? If you've got a solid positive trading expectancy then many days you will end in profit even with just a few trades but it's not always going to be the case.
That said, while things didn't turn profitable here I know that if I take similar trades that fit my plan on a decent numbers of days then most of those days will be profitable and overall the gains should considerably outstrip any small losses like today.
That's what matters. Welcome to the reality of trading.
Cody Hind
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Great post Cody, 3rd trade for me was one of those situations I let a winner turn loser, a deadly trading sin.
Keep up the great work with the posts; despite what you say, I think you got a positive, entertaining, and informative “edge” to your writing.
Best of luck trading this week!
I appreciate the kind words on my writing and these Journal posts, Cory. Now it’s just a matter of trying to keep it going consistently!
That third trade was a tough one. As discussed during the session, I did want that to run higher but I was very wary of things snapping back because of the way the market had been moving with those deeper pullbacks all morning. It still came a bit more suddenly than expected but once I saw that rapid selling coming in I was looking for ways to get out rather than ride it. As you can see I did try and give it a moment or two to make another push and at least get those extra few ticks but when it wasn’t happening it seemed best to take what was certain rather than what might occur.
Usually trusting my intuition this way works out due to lots of screen time and experience but not always. There’s absolutely times when I cut things a bit too early and miss the later run and some examples can be seen in prior Journal posts. But in the end occasionally making those intuitive reads seems more helpful than harmful and that shows in the actual stats so it comes down to the usual approach of not letting perfection get in the way of profitability.
Thanks and hope your trading goes well the rest of the week too!