This short article is to share some excellent Q&A following our recent series on "patience".
Check out the prior articles if you missed them:
Part 1 – https://yourtradingcoach.com/trader/patience-is-a-key-component-of-your-edge-part-1/
Part 2 – https://yourtradingcoach.com/trader/patience-is-a-key-component-of-your-edge-part-2/
In particular, it relates to the period of "emotional reaction" in last week's trade sequence:
Q. Won't I be annoyed if I don't take a third attempt short and the market moves lower without me?
So this is what we're talking about here:
Would I be annoyed?
Ok… maybe a little. Maybe briefly.
It does happen.
A third attempt may well have worked.
But given my emotional state (interfering with my ability to make quality decisions) and the fact that I was fading the immediate, short-term momentum, there is a much higher likelihood of it losing.
I don't have to catch every move. I trade the odds. And from that perspective the smarter option is to stand aside.
If the lower odds outcome happens and the market moves lower without me, so what. The smart decision was to not trade because more often than not the third attempt would have stopped out as well.
You should never be afraid to walk away. Take whatever time is necessary to clear your mind.
It's not quitting. It's not failure. It's a tactical withdrawal to regroup in order to allow you to resume the fight again when the odds are more in your favour.
Let's wrap up one final time with the key takeaway from Part 1…
You don't have to trade every price sequence.
If the market offers something that is not comfortable, or that's not easy to read, stand aside and wait.
The time to trade is ONLY when you feel it's flowing nicely and you're completely in sync with the price swings.
That is when you trade. No other time.
And the pattern-interrupt question from Part 2…
Pre-trade, ask yourself this question – "Is the market telling me to take this trade, or is it coming from inside me?"
And a final piece from today…
Never be afraid to step away.It's not quitting. It's not failure. It's a tactical withdrawal to regroup in order to allow you to resume the fight again when the odds are more in your favour.
recalling my own experiences as a beginner, one of the worst things that happened to me was to actually have the market “reward” me a few times with a net profit, when in similar scenarios I attempted entry a third and maybe a fourth time…
When the market rewards us for taking low probability entries, it will then take a while for us to realize that in the long run such moves are ill-conceived.
This realization process will cost us *way more* than whatever profits our low probability trade generated that one time, or two. I learned it the hard way!
Yes, the market is a harsh teacher.
“Never be afraid to step away.It’s not quitting. It’s not failure. It’s a tactical withdrawal to regroup in order to allow you to resume the fight again when the odds are more in your favour.”
This is really great. Just the mindset flip I needed, because I used to very much see it as quitting, and honestly I am happy to have been wrong. Because about 9 bad trades and 1 good one later, it just seems like i am trying to saw down a tree with a toothbrush.
Also thank you Michael, I found your input valuable aswell and it’s not the 1st time either.
I’m glad you find some value in my posts, Marcus: studying Lance’s materials (mainly YTC Price Action, and the past blog posts) is how I became profitable, so I make it a point to share my experiences here if I feel that it might add value. It’s my small way to express my thanks! 🙂
Speaking of experience, if it may help: every time you enter a trade and “regret” it a couple minutes later because you have a small loss and the price is not budging, instead of waiting because your stop is still far away, just get out.
I used to think this way all the time: my stop is still far, I’m losing a minuscule amount (say about R/10), so I’m gonna ignore my gut feeling that this trade is wrong, and “trust my stop”… Well, if I ignore my gut feeling, I am indeed “trusting” that my stop WILL get hit all the time! Learned this the hard way, too… 🙂
If you get out when you are losing only a small amount, because your intuition tells you that the trade premise was wrong, it makes a huge, astronomical difference: let’s say you manage to cut your losses to around R/10 by trusting your instinct in your 9 bad trades, and then you make even just a measly 1R on that good one later: you will break even. I’m happy to call myself a quitter, if I get a result like this! :-))
Learning to be a “happy quitter”, is another thing that improved my results almost overnight.
Thanks Michael. 🙂
Thanks Marcus. In many respects, the path to long-term winning as a trader is in learning to become a better loser. 🙂
Standing aside when the odds are not in our favour is a big part of this, ensuring we limit further damage. And when we do trade… keep those losses small.
I’m spamming, I know: I promise not to comment on new posts for the next two weeks! But this is also very relevant, I think.
When you get asked: “Won’t I be annoyed if I don’t take a third attempt short and the market moves lower without me?”
I think another way to answer is: “If that never happens to me, then I know that I’m NOT trading correctly!”
The reason is that, if we do catch ALL the moves, that means that we must be trading on *every single pattern* that we see, regardless of the odds: that’s obviously NOT good…
Yet another way to see this, is that the price for catching every single move is to sustain multiple large losses every time the trade premise is too weak to begin with. So, if we happen to be catching every move, it’s very likely that we are losing a lot overall. Or that we are going to, eventually…
Very true. It’s all about putting the odds in your favour. And you can’t be achieving that if you’re targeting every single price move or price pattern.
What a beautiful discussion going on. Carry on !! 🙂