I am convinced every trader you speak to, when asked, will admit to some idiosyncrasy that is present in their trading day.
Confession time: I talk to myself. Out loud. And because I live alone, I find myself gently reminding myself that this is a behavior that is best to remain within my own four walls lest I want to end up in a softly padded room somewhere.
Aside from finding 1-2 strategies that you recognize in an instant; correctly adding is the third most important part of a successful trade (the second being adhering to your stop if the trade goes against you).
Taking the opportunity to add will enable a couple of things to happen:
- keeps your position small so FOMO is not present but you aren’t risking too much too soon. You are in without danger of too large of an early stop.
- enables you to grow your profits while continuing to minimize your potential loss as the trade proves your directional thought correct.
MYSZ had a massive gap down on 2/16 and had maintained its pre-market trend. I had taken the quick rip at 9:50 am and was out in 10 minutes for a solid .20, which made my day goal considering the r/r and size I had taken but I had a feeling it wasn’t done, so I set alerts and left it alone.
VWAP proved itself again when it held the price, so I started very small just to be in for a feeler. Whatever small looks like for you, keep it manageable, as you have to remember that adds can only occur when your directional thought proves itself RIGHT. This is so key and why so many new traders (including myself at one time) struggle and/or fail. This was such a pivotal moment for my p/l when I reversed how I approached starting into trades. You are never going to catch the exact top or bottom but starting small with a theory will get you into some amazing trades. I have gotten so much better by nailing the correct direction but if you are in too big and wrong it can result in some larger than necessary losses. By the time I had added on washouts and also reduced by locking in some profits when it ramped, my average resulted in a .60 gain, which was awesome considering the risk moved to break even if I was wrong. Always play safely and protect your assets…and pay yourself along the way.
If you haven’t read the book, “Tools of Titans”, do yourself a favor and pick it up. While the hard cover weighs in at probably 3 pounds, it is one of those books you will find yourself needing to set down to absorb what you just read. And then rereading again.
(chapstick to warn you of thickness of book)
Have you heard this? While it typically applies to Poker, I find it just as useful in trading. One of the biggest edges I have found is putting myself in the mindset of the trader sitting opposite of the position I am in or about to take. Are they feeling panicked? Are they feeling fat and sassy? There is the edge, as their sentiment may abruptly see a change. Whether it is a long term or a short term difference, the trend can abruptly change away from their feelings. When they quickly react, as most will, it provides opportunity.