My sell order for the Put option was when GOOG hit 1001. Yesterday's (11/20/18) low was 996.02 but if you've been following this series of posts you know my rules got me out 2 trading days earlier. Only thing worse than being right but losing money on a trade is experiencing price action that's an exception to the most common behavior that your rules are based on. What's so bad about that is that it shakes your confidence in your rules. If you can't follow your rules you're trading on emotion which is a very bad idea.
My biggest challenge at this point in my trading journey (started 2010) is self discipline when a set up looks really good but doesn't fully satisfy my rules. Can't believe my discipline isn't perfect by now. Its much better but not perfect. So when I exercise discipline in the face of pain, like I did on this trade, and take the loss to avoid a bigger loss, then price action reverses and hits the original target, it seriously bothers you.
You might say why not just get back in when you saw the reversal? In fact, that's exactly what I told myself. But the next morning I was trading other things and didn't trust what I saw on GOOG, and didn't see much of a pull back to re-enter the bearish trade anyway.
Final take away from this trade is that no methodology or set of trading rules will work 100% of the time. So you're going to experience losses even if you have perfect discipline. You can always improve your rules but if they are built on a solid foundation then you can't let the losing trades get you off your game.
Create rules to give yourself an edge and control losses. Back test those rules until you believe in them. Then be willing to improve them but you must follow them to get the edge you need.
No comments:
Post a Comment