Evening traders,
I'm going to digress a bit tonight and talk about how you deal with losses. I will do the daily summary for today's action sometime this weekend.
So the topic is: How do you deal with trading losses?
Hookay.. lets do a reality check and see what's up now.
Alright.. I had long positions for two accounts yesterday and the US market closed largely unchanged which was a good thing. I was thinking of holding it for a nice up swing as the market has failed to push down despite making new lows and pushing down real hard.
But JP Morgan dropped a bomb on many of us after the market closed today with the London Whale debacle.
But all was still good today because the longs was closed out at opening for a point profit, which was ok, considering that the Dow futures was down with about 80 points before we opened.
Then I took a really stupid position and long at 81 in the morning. I immediately know that the position was doomed because I regretted entering right after I was filled. I tried to get out with 0.5 profit if I could, but I couldn't. I could have hit the market at 80.50 and got filled, but I was thinking to at least cover the commissions at least. So I held on to a position that I didn't want, which really sucked for me.
Then we had a bizarre market today because Cash flashed down 10 points today from 1584 to 1574, only to go back to 84 a few minutes later. I closed my long position at near the lows because of that and after a while, the market went back up which was what I was expecting all along before the 10 points drop. Honestly being quite new to the local market here, this was da shit. I think you rarely, if ever, see such things happening in a liquid and developed market. But we are trading the local market now so we have to deal with whatever the market throws at us. If you would excuse my language, its pretty 'f' up if you ask me. And the regulators are wondering why our market never grows. Which is a big 'lol' for me.
Anyway, I had a bad entry, JP dropped a bomb on the market, and we had a freak flash down in the cash market. I can take a loss like a man, even though it is a bitter pill to swallow at times because you know it all started with the bad entry and not exiting the position immediately right after realizing that the position is wrong.
And to get to the bottom of the story, honestly, the losses was small as well. But why am I getting so worked up over this small loss?
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Well, the comfortable thing to do would be to blame the market, to blame JP Morgan, to blame the flash cash drop and reverse. But doing that would not make me grow as a trader.
Now, even though the loss is just a few points, I feel really bad because the accounts entered on my advice. For my own trades, each time I get hit on my stop losses, it would be way more than what these two accounts lose combined. But this is not the point.
The question is, how do you deal with losses? Do you take it like a man or a women? Do you learn from your mistakes?
For me, here are my philosophy on taking losses.
1) If I entered with a good set up, but the market still went against me, then I did the right thing and it was a good loss. I don't feel bad about it because I know that entering on good set ups will benefit me in the long term.
2) If I entered the market and it is based on some shaky conviction, and the trade eventually went against me like today, then I would really feel the brunt of the experience saying to me, 'you are repeating some really silly mistakes again!'. This really is the killer.. I really hate losing, but what I hate more is losing foolishly.
3) If I entered the market on shaky conviction and based on luck, and the market went in my favor, I would feel happy that I made money, but I also know that this is bad for me in the long term because I would get into the belief that lower probability trades can make money too! Which of course is a bad thing. It would develop a bad habit of taking risky trades instead of good and solid set ups.
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So we lost a few points today. A small hit to the portfolio, but a big hit to me personally. What really kicked me over was that I entered a bad trade without confirmation AND not getting out immediately after realizing I was wrong and trying to save a few bucks for commission.
If I was really on the ball, I would have been on the right side of the market instead, which I should be if I had followed my rule.
A pretty messed up day for me personally. I take trading very seriously so screwing up like this feels pretty bad no matter what the size of the losses are.
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So, gonna get rested for the weekend. Starting fresh again next week. No Jpm bomb or some freaking flash cash drop is gonna stop this trader here. :)
Have a good weekend all.
Best Wishes,
Tech Trader
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