False Sense of Success
by Cliff Clark
Newer traders often feel that they have reached a certain level of success when they start to have some profitable days. Unfortunately, this is often very misleading. Of course there has been some level of accomplishment made to have profitable days. The truth of it is that almost anyone trading will have some good days. They may have some very good days. So why is this bad thing? It's a bad thing because it instills a false sense of success.
Having good days or very good days is not a measurement of success. Aggressive traders may have a scorecard filled with many very good days, and many bad days. They fail because the bad days are worse than the good days.
It is not uncommon for traders to make most of their weekly profit in one to two really good days, two days will likely be small profits or break even days, and one day will likely be a loss. This is a typical week for most successful day traders. Having one or two good days is not that tough. What is hard it not giving it back on the other three days.
The fact of the matter is, good traders are measured in how they do on their bad days. Being able to squeeze small profits out of the tough days and not give up the profits of the good days is what is key. Do you have nice profitable days and give back the money over the next two days or possibly have that one disaster day? If this sounds like something you do, it's time to examine your records to see why. Are you failing to take stops? Perhaps you are just taking to many poor trades. Do a deep dive, narrowing the losses on your bad days and not giving back profits are your good days is the key to success in this business.
For those with no plan there is not much help we can give you. You have to take responsibility for yourself. You will not succeed in this business without a plan and some level of tracking what you are doing. You may make some money following moderator calls but it will never lead you to long term success or to the mountains of money you dream about at night. Get to work on that plan today!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
