Snatching defeat from the jaws of victory
You know the trade. We’ve all had them. It’s going along wonderfully and then suddenly, without the slightest provocation, it’s a losing trade.
Mine was this January. It was probably the most flawless, easiest, most lovely M3 I’ve ever seen. Always profitable, rarely adjusted, it just burbled along making money. It hit some of my exit criteria on December 31st, which would have been a PERFECT day to exit. I was at my target profit, it was the last trading day and it would have been a fabulous way to end a really profitable year. Heck, it was even my birthday.
That day, though, I was doing my final end of year tax moves across multiple accounts and multiple brokerages. Rather than dividing my attention, I decided to leave the M3 alone and, as I wrote in my trading notebook, “Exit on Monday taking whatever profit I have at that point.”
So, yes, I left it alone until the next trading day, Monday, January 4th.
Now, can’t you just hear the sinister music in the background? This is called foreshadowing, my friends. If you can’t hear the music, here’s an image that may help:
Because we all remember what happened on January 4th, don’t we?
“Exit Monday” rolled around and the concept of “whatever profit” was a laughable one. In one day, I lost it all. In one minute, actually, because the overnight gap was fine but in that first minute the RUT plunged about 30 points and the volatility skyrocketed. I tried to recover the trade but ended up bailing out a couple of days later when it became clear that trying to hold this trade safely, this close to expiration, was probably going to be too difficult.
It wasn’t a bad loss, much less than my maximum allowed, but it still stung. Actually, my verb tense is wrong. It STILL stings.
John discusses numerous ways to handle the stress of trading in the APM2 course so I won’t review them all here, but this certainly was a case where I found many of the techniques helpful. For me, two in particular stand out.
First, I need to accept that this is part of trading; it has happened before and it will happen again. All of the best trade plans in the world won’t save you every single time. I know; I went back and reviewed the trade repeatedly on December 31st and, realizing that I was dealing with so many other trades at the same time, I would make the same decision again. It was bad luck, not a bad decision.
(Oh, I’ve had those “bad decision” trades, too! And I’ve had to learn to deal with them, as well.)
Second, I wasn’t the only one to whom this has happened. I watched some of the video archives where John showed his losing trades, both paper and live. I talked to some other traders whom I greatly respect, who ALSO watched their profit vanish. It was of some comfort to realize I wasn’t the only trader in the world who’s had this kind of bad luck.
If you’ve had the same thing happen, you know (all too well) what I’m talking about and can commiserate.
Or perhaps you’re new and you haven’t yet survived the experience. Just wait; your time will come. And when it does, know that you’re not alone.
Sometimes, that’s the only solace there is.
Written and contributed by Cynthia Sarver