- When trades aren't working, leave and come back
- Long setups are for calls. Short setups are for puts. Don't reverse it, but do potentially try again when it sets up again (see leave and come back) this change might help me the most.
- Big gains come from trading right. Big losses come from trading wrong.
8 days ago, I had a new account high. The next day I lost 10%. When I say lost... I know very well where it went. It went down the drain bc indiscretion. Cocky, overconfident trading.
It took me basically 2 weeks to recover. Two +5% days, a -7%, some little ones, and today, finally, +8%. The funny thing about today's big day, I didn't feel it happening. I was trading pretty small size, took one big loss (Friday options can burn!), but the win after win added up...probably also bc Friday and my ultra volitile 1st otm option was going itm. Same thing that burns me on losses.
So... how to view this. I don't like a -5% day and especially not a -10% day. But it's too easy to say, "so just don't have one". I need to understand how I get there. Is it that I'm not stopping trading when I'm -2%? Maybe. There's a complication with that, and it involves trading small.
When I trade big, I can lose big. That's pretty obvious. Even if I sometimes win, my biggest losers are the too-big trades, but my biggest winners are not from oversized postions. My biggest winners are getting into good trades and letting profits run.
That's really important so I'll restate it:
Big winners come from trading right.
Big losers come from trading wrong.
Even with my overall success, I am still susceptible to poor trading quality that is costing me money. Especially lately, I'm losing on "reversing" revenge trades. Ex: well if my trade isn't going up, then clearly it's going to get wrecked so I reverse it and loose again, then it does go up as expected in the first place. What I need to do is skip the impulse to reverse.
IF the setup is for long, and the long doesn't work... WAIT for another long! Don't get cute with a short. Effective shorts come from different setups.
Back to the thought that I should stop trading when I'm -2%, so I should never even get to -5%. Well yes, but, here's how that happens:
If I'm down 2%, then probably I'm trading clockwork and things aren't playing out right. At that point, YES, I totally should just walk away. But, because I've been taking small size I still have a lot of cash left and I have a hard time stopping. I could even walk away and come back! Doesn't have to be a hard stop. I just need to assess that my plays aren't working today.
Go and come back!... The market will still be there. It takes time for new setups to develop anyway. Go and come back. Or don't come back. But think about it, if my high-probability plays aren't working, then it's not my day. Banging my head and having losses create psychological toxicity that is counterproductive to profitable trading.
Can't get water from a stone. Only trade true good setups. Don't get cute.
