I sent the following post out via social media on Tuesday, prompted by some discussion with a trader who dug himself into quite a hole through doubling down on losses.
This message is so important I thought I'd share it with my larger audience here in the newsletter. And also take the opportunity to expand upon the idea a little.
This is one of the key advantages you have as a discretionary trader.
YOU get to decide when and where you will play this game.
If the current conditions are not to your liking, NO-ONE is forcing you to play.
Get out of there.
Take a break. Clear your mind.
And come back at a time of YOUR choosing, when the conditions are more suited to your style of trading.
I have clear guidelines in my own trading plan:
ACTION ITEM:
Schedule some time to review or amend your Trading Plan.
Make sure to include guidelines or rules for the following:
(a) At what point intra-session will you stand aside and force a break from trading? What changes need to occur before you will allow yourself to resume trading?
(b) At what level of intra-session drawdown will you force a stop for the day?
And longer term:
(c) At what level of drawdown will you force a break from all trading, in order to review your performance and reconsider your plan?
Happy trading,
Lance Beggs
PS: For those concerned that trading should never be a fight… it's simply an analogy that I find particularly useful. See here – https://yourtradingcoach.com/trading-process-and-strategy/trading-is-a-fight/ . The concept is still relevant even if you prefer to not view the game in this manner. If you're out of sync with the market, step away. Come back and play at a time of your choosing, when the conditions are more suited to your style of trading and your preference for market conditions.
Mr. Lance, the control of this challenge is very critical
I get the biggest loss for not controlling this and I try every day to control this situation by following strict rules.
It is both difficult and easy because this is a psychological challenge and we think that with this framework we deprive ourselves of opportunities, but instead we protect ourselves and our capital, and I think this is the most important step in trading path.
And to quote you, “we can survive another day and move on smarter” 🙂
THANKS A LOT
Hi Ari,
You got the key point – we think we’re depriving ourselves of opportunity but that’s not true. The market has endless opportunity. We’re saving ourselves now and then waiting for something hopefully higher probability.
Lance
That’s exactly right
I hope and of course I try to be better in this challenge
THANK YOU SO MUCH