Last week's article led to an interesting comment about the sequence preceding the one discussed in that article.
Check it out here if you missed it – How to Enter When the Pullback Shows Strength!
The email feedback expressed an interest in the fact that the session started with a loss and yet I managed to quickly recover that loss.
"I particularly like the way you showed how you were wrong on the long but it did not affect your session, you focused on the price action projected, possible scenarios and continued to do your job."
So I thought we should look at this earlier sequence and see if there are any lessons available.
Let's begin with the trading timeframe, showing the price action which offered the initial loss and the subsequent two wins.
Let's start by examining the LONG BPB trade.
I'd love to be able to say I caught the SHORT entry as the breakout failed. But it was not to be. I was biased LONG. I was wrong.
Loss was minimised though. So this was a good trade.
Except for the fact that I've started the session in minor drawdown (which seems to be a habit lately!!!!)
Let's move on to the rest of the sequence.
So what are the lessons here?
While you might take something away from the chart images, I think the greatest value comes through thinking about how you let an early loss affect your mindset.
It's one loss. Granted, it's starting off your session, which is never nice. But it's one loss.
Trading is a business of success over a series of trades. Implied within that statement is the fact that there WILL be losses. So you need to learn to not only accept them, but also to manage your mindset so that they do not lead to a meltdown in mindset and P&L.
Here's something to try…
Use a FIRST LOSS as a trigger to REFOCUS.
Make sure you're breathing slowly and deeply. Mind clear, body relaxed. Reassess the trend and project forward. Where is the next opportunity. Now FOCUS.
We're going to make sure this is an A+ trade.
This doesn't mean the next one will win. But regardless of whether it wins or loses, your aim is to make it one you'd be proud to place on your wall as a perfect representation of your trading plan.
Now, the obvious objection to this is the fact that EVERY trade should be approached in this manner.
And that's fine. I agree. But the reality is that we, as human traders, do not always bring that degree of focus and situational awareness to the game.
Use the first loss as a trigger to check yourself. Check your focus. Check your awareness. Check your commitment to excellence in managing the risk and opportunity that is coming in the next sequence of price movement.
Make it A+.
What if that A+ trade does provide a loss though?Beyond the one loss, this is generally how I operate:
- Two failed trade ideas in a row (not full losses) – I'll consider skipping this setup area and just letting it go.
- Three failed trade ideas in a row (not full losses) – I'm definitely moving on to the next setup area. I'm not in sync with the market. Let it go.
- Two full losses in a row – Timeout. Get away. Refresh, relax and come back later with a clear mind.
Take some time out to consider how you typically let an early loss affect your mindset. Does it often lead to frustration and disappointment? Does it often lead to a meltdown?
Could you add value to your business by considering a more positive "first loss" trigger and action?
Use a FIRST LOSS as a trigger to REFOCUS.
Our primary aim as traders is ALWAYS to ensure we survive to trade another day. To achieve that, we can't let a single loss propel us into a spiral of angry revenge-trading. Manage your mindset! Make the next trade one you'll be proud of, regardless of whether it wins or loses.
Wishing you good trading, with a clear and focused mind,
PS. Kind of related to the above… I'm reminded of the following two YTC social media posts. Check them out…
- 12/01/2016 – Dumb Trades Happen – What Matters Is How You React To Them
- 11/02/2015 – Dumb Trades – Follow Them With Good Ones
You might also like to use "dumb trades" as a trigger to refocus, aiming to follow them up with another A+ performance. Give it a try.
Lance, what made you decide to focus on NQ? How do you know when to move on from a symbol and focus your efforts elsewhere? I imagine it might have something to do with CL or TF not properly showing you the stalls at turn areas as you’d like to see on your range charts.
No good reason mostly. Just restless and needing change. I had never seriously traded NQ till recently but it’s fast become my favourite emini contract. I just love the pace and smoothness of price movement.
But CL, TF, YM, NQ are all fine. There is no “best” market, just what suits you and your style of trading. This is the reason ES is off the list. Many traders love it. It just doesn’t suit me (too slow, thick and lethargic in its price movement).
The “stall at the turn” on range charts is not an essential feature of a pullback. Adjust to suit the nature of each instrument. Some provide this at times. At other times the pullbacks will be more the v-turn variety. Read the market and adjust to suit the context.
Nice post again !
I was wondering how do you choose a trading instrument, As you said it is very important for a scrip to move nicely to be able to trade .
I wanted to ask you about the trading instrument you choose :
1. Is there any minimum ticks per min that you wish to have in a scrip to trade ?
2. How did you come up with 2 range bar as a smaller TF for NQ , why not 4 or 6 . What did you see in 2 range bar
3. which trading platform do you use ?
Do you have a fixed answer to Question 1 and 2 , or its just a ‘feel good’ factor about a trading instrument
1. It’s just a matter of trial and error. Spend a few days on all instruments that are of interest to you, in order to get a feel for the pace, directionality, volatility, liquidity, thickness etc. All markets have their own personality. It’s a matter of finding the best fit for you and your style of trading.
2. (a) It needs to show the detail “inside” the TTF candle. 4 or 6 range would not always do that. (b) It needs to be the right pace – not too fast that I can’t keep up and not too slow that I get no feel for sentiment. Again, trial and error.
3. See my resources page for all the tools I use – https://yourtradingcoach.com/resources/
These are very important points and as you say we need to focus on the process to be successful
Therefore, loss is a part of this process and of course it must be controlled and managed
Thank you very much Mr. Lance
You’re welcome Ari. Best of luck with your trading.