In response to last week’s article (Pattern Breakout Entry Before the Breakout), I received an email from Francis who was sick of seeing winning trades and said he’d love to see some that lose.
Francis… these charts are for you! 🙂
This sequence occurred just a bit later in the same session.
Not every trade is a winner!
And not every sequence of trades is a winner!
But we don’t aim to profit on any one particular trade. Profits are made over a larger series of trades.
E = (W% x Ave Win) – (L% x Ave Loss)
Really, while some of my decision making was not the best, this sequence was ok. The loss is minimal (one single tick plus commissions).
More importantly, it was three attempts to enter short at the high of the day, with an expectation that price could drop for a 5 or 6R return. This is an attempt worth taking.
Maybe next time I’ll get the winner, which will more than make up for my single tick plus commission loss.
Losses should be rather boring like this. Keep them small. Allow yourself to profit over the longer term through ensuring your average win is greater than your average loss.