Chasing Losses
By Cliff Clark
I'm wondering how you handle losses. Are you sitting there calm and composed or are you ready to jump back in haphazardly. I think most of us are more prone to the second case especially when it's a particularly hard loss. Perhaps your trade went 1.9R and came back to stop you at break even or went .95R and came back to stop you for a full loss. These are really tough on our psyche.
I have had many mentors that have helped me in my quest to become a profitable trader. But the person that helped me the most was a professional poker player I did not even know. I was playing a tournament at the WSOP and we were talking about tilt. Tilt is when a poker player takes a few tough losses and goes on a rampage chasing losses. The thing that she said to me that really resonated was “You can't win when you are losing”. Does that line make sense to you? What it means is when we take a couple of tough losses we have to step back and reexamine what we are going. We can't keep chasing those losses or I guess the term we use in trading is revenge trade.
When you suffer a tough loss sit back and examine your mind set. Are you calm enough to continue or should you take a short break. There are a number of things you can do. Try to do some deep breathing, take a walk or perhaps a short meditation. Just take some time to calm yourself and when you feel you have calmed down, by all means jump back in.
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.
