Are You Ever Done Learning?
By Cliff Clark
Perhaps you have made significant strides in your trading and are meeting all of your goals and are making money consistently. Then you start thinking to yourself, “I have arrived, I can finally stop learning”. Are you waiting for this day? The day when you have everything solved and you are not running into any new issues! The day when all of your problems are mastered and you can just relax! The day when you are swimming naked in $100 bills!
If you are, then I have some good news and some bad news. The good news is that if you have reached a new level of success and there are only two times that you need to worry about uncovering new issues. The bad news is that these two times are when you make money and when you lose money.
That's an old traders joke! While humor was intended, the above statement is very real. If you have not been there yet, read on and we'll try to keep you on the right track.
So now as you begin to do well you obtain a new high from being able to pull money out of the markets seemingly at will. With this new skill level you achieve a high level of confidence that you haven't felt before which leads you to be overconfident. This new found overconfidence can lead to complacency. Then that inevitable losing streak comes. Overconfidence leads you to think that you are smarter than your trading plan. You start to take more trades, maybe you double your risk size and maybe even decide you don't need to take a stop loss here or there. Any of these things will surely increase your profits no doubt!
Well, not if your standards drop so that you can take more trades. And not if increasing your share size out of your comfort zone will cause you to manage your trades differently because of the psychological pressure you put on yourself with a larger number of trades. All of the discipline that made you good are now being discarded.
Does this sound familiar anyone? Our human psychology is as infinitely complex as the market itself. You cannot turn your emotions on and off at will. You cannot instantly fix every issue.
However, you can work on making yourself recognize when problems are arising and learn to manage them. You should also realize, that just like a doctor, lawyer, or engineer, the learning process never stops. All professional traders have gone through one form or another of the many challenges it takes to become a professional trader. Your goal should be to get better at trading each and every day. I know when I’m 80 years old and still trading, I will still be learning. It never stops. If you have a love for trading, why would you ever want to stop learning?
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.
