Is This a Trade You Would Take if You Were in Drawdown?

 

Some of my better trades lately seem to occur after a string of marginal trades which either stop out or seriously underperform.

Mostly because of my rule which says that after two poor trades I need to step aside, clear my mind and reassess the situation.

Time out!

Reassess!

It prevents a downward spiral of emotional revenge trading.

And allows me to return to the market with a new plan. Usually, a plan which waits for a change of structure and takes the first pullback opportunity within that new market regime.

<image: Two trades placing me in drawdown.>

<image: Time out. Reassess.>

<image: Consider the options when price breaks current structure.>

<image: Entry>

<image: Exit>

So this brings me to an idea that may help me cut out some of the more marginal trades.

And perhaps may help you with improving your trade quality as well.

Rather than waiting for two marginal trades to place me in drawdown, maybe I could trade "AS IF" I were already in that situation.

Prior to entry, ask:

  • "Is this a trade I would take if I were in drawdown?"

 

If so, go for it.

But if not, maybe pause and reassess.

Sometimes it will keep you out of a winner. That's how this game of probabilities works.

But if it's keeping you out of a number of marginal trades then there could well be a positive change to your edge.

If the idea appeals to you, give it a try. But track the impact it has on your edge over a series of "avoided trades".

Prior to entry, ask:

  • "Is this a trade I would take if I were in drawdown?"

 

<image: This IS a trade I'd take in drawdown.>

Happy trading,

Lance Beggs

 


 

Written by

YourTradingCoach - Admin

3 Comments to “Is This a Trade You Would Take if You Were in Drawdown?”

  1. Bruce says:

    Aaah so I’m not the only one that’s experienced this feeling and this scenario. Thanks for sharing and being so honest. It’s bewildering when a promising entry goes poop… and then you think hang on a minute I can do this so you try again and it goes poop again… Good rule and kinda like basket-ball, if two foul shots failed, you look for a rebound and then setup your next shot.

    • Lance Beggs says:

      Hi Bruce,

      Ha ha. I’m sure we’re not the only two who suffer from this problem. In fact, I’d bet there’s not a discretionary trader on the planet who doesn’t occasionally follow one bad trade with a second. πŸ™‚

      The key is stopping it at two though.

      Cheers,
      Lance

  2. Personally I think we you are in a draw down time it is important to get a win. Even if it is a small win.

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