I've experienced at least a dozen ways in which a trade can go south and I'm sure I'll experience a dozen more I hadn't even thought of. I've stopped keeping track of the number of times I was top ticked and found it too demoralizing to continue tracking the number of times my stop was bottom ticked only to watch price rebound to new highs. I was surprised to find out that there are ticks you can get filled at below the low of the day; yes, that's correct, the printed low of the day may not have been the actual low. I stopped keeping track of the number of times price came within a penny of my exit target alert only to close out at the end of the day below my entry –or worse –stopped out. But, you know what... It just doesn't matter.
Something I've been working on in my trading lately is taking another shot at a stock that I've exited or been stopped out on. Usually I'd find a few or more reasons not to reenter such as not wanting to deal with wash rules, or not being able to handle taking a second loss on the same stock so soon afterward. The problem with this is that it is anathema to the way world class traders think and act. World class traders will take multiple shots on the same stock if they still define it as a quality set up with an edge and a valid entry signal as defined by their rules. This is what matters to them, not the emotional attachment to a ticker and the recent experience of taking a loss or two. It's about the set ups and not the bias to a particular symbol.
Bias to a symbol is a common theme with greater repercussions than one might think. It is in part why I would not take another shot on the same stock, and it's also why at times I'll have a more favorable view of a set up if I know what the symbol is regardless of how less than stellar the chart may look. So, in order to think and therefor act like a trader I've made a conscious decision to get over the hump by occasionally taking another entry. This past week LF was my stock.
One of my rules based upon assessment of my trades is to exit a stock if it closes lower than my entry. Empirically this makes sense because why should I be long something that is not going up? Emotionally however, this was a difficult hurdle for me to overcome as it forced me into accepting a number of scratch trade which increased my losing percentage and string of losses as well as having the appearance of adding up to a significant amount; however, my statistics don't lie and coming to grips with the simple fact that this is a high probability failure trade on my time frame finally convinced me it's acceptable to take a larger number of small losses and increase the frequency of my trading (I had to spend a lot of time improving trade management, but that's another story). With this in mind I took an entry signal on LF on Monday and closed it at the end of the day and ditto for Tuesday. Come Thursday I witnessed, much to my chagrin, LF bolting out the gate and up nearly 6% before my scan alerted me.
Now I was faced with a dilemma, let it pass and miss out on what's been setting up to be a good trade opportunity or take a third shot and, heaven forbid, watch it reverse hard on me and get stopped out a third time. I took a few moments to contemplate and noted that it was currently priced at my maximum chase point on a stock at this price level, 6%. I decided to take the trade, it was still a good set up.
Quickly the entry was confirmed as the price continued higher and I found myself up 5%. It seems just as quickly maximum adversity kicked in like steel toes to my teeth and the market sent a simple reminder to me that no matter how solid the set up, anything can and will happen, especially when least expected or prepared. Conveniently the stock was downgraded and after hour news hit the wire that the CFO was resigning and I was quickly preparing myself for the acceptance that the stock would gap down like a stone. Regardless of how I felt about the downgrade being a bullshit call, particularly since it was done during market hours which is rare, and irrespective that I didn't believe the CFO resignation was an issue, I didn't expect the market reaction to take this view and basically accepted this would be a loss.
The set up was sound, the entry within reason, and the amount risked tolerable. I took a shot, and then another, and finally one more. This I can control. Entering and getting stopped out 30 seconds later I can not. Entering and having a BS downgrade that could have been done premarket instead of during hours and after an 11% move I can not. In the end, however, it just doesn't matter. It just doesn't matter how the trade gets from A-Z as long as it's part of plan. Yes it may at times be an emotional roller coaster and yes sometimes will be more difficult than others, but in the scheme of things it's just one trade and it just doesn't matter. Occasionally there will be that isolated trade that stings and hurts so badly it flashes before your eyes before you take a signal, but over time these become fewer and farther between. As my sample size grows larger these trades shrink, and in the grander scheme of things, it just doesn't matter. One thing that truly matters is trading with a solid plan that allows one to get to this point that it just doesn't matter.
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