A Trade A Day

The market pullback over the past couple of days caused a couple of my longs to stop at breakeven. In my opinion, It’s an issue of timing. The market corrected. The timing didn’t work out and I got stopped. I can accept that because I followed my method. My trades didn’t work out the way I wanted but that’s normal. In fact, it’s expected that most of the time they won’t work out.

Every trade I post and every potential trade on my watchlist, I think, is a good trade. But they don’t all end up making money. I have to cut them when they fail. I think it’s common knowledge by now, that losers should not become bigger losers. As traders, we keep our losses small, but what about when good trades go bad? What should we do when we’re riding a winner that’s flashing sell signals? We know we should get out, but sometimes we bend the rules and hang on.

There are tangible, account-saving reasons for cutting our losers. Jeff White at thestockbandit.net wrote an article on when good trades go bad. Jeff outlines some of the benefits we can reap from cutting out losers. It’s worth a read.

Too often traders fall into the trap of measuring their worth and ego on the results of their trades. When we fall into this trap, covering our losses becomes more painful than it should. To combat this, I grade the quality of my trading decisions to stroke my ego and boost my self worth. Did I follow my rules? Did I cut my loses short? When my method said sell, did I sell? When the market did turn, did I act on my buy signals? True, the bank won’t take “quality decisions” in lieu of a mortgage payment, but I can assure you that quality trading decisions will do more for your bank account over the long term than the results of your last couple of trades.

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