The daily chart above looks weak. We bounced off the 20sma, closed below the 8ema, and the ADX crossed back to a negative condition. Bearishness.
However, we just closed the gap from 12/6/21 - 12/7/21. We never went lower than the 161.8% extension of the green range. Stochastics are not overbought. And, while we did close under the 8ema, we closed very near it. Also, we haven't seen confirmation that we're going lower by the next candle, which of course is because it hasn't formed yet lol.
Given the above, its a difficult call to make, whether to hold or exit. Some doubt is introduced by suspecting I'm just avoiding taking a loss, which is a real psychological bias traders have to fight. But being a Friday, and having only a small amount of potential loss, I decided to hold the position because we wouldn't want to miss a gap up and run to the upside on Monday when we don't have a convincing case today either way.
It may seem ridiculous to do this analysis and struggle with a decision when there is so little capital at risk on this trade. But there are two things you need to consider. One is I may be documenting my trades with only a proportional fraction of my actual position. But more importantly, good trading is far more about process than outcome. There isn't anyone in the world who is saying their trading methodology has a 100% win rate. So occasional, or even frequent, losses are guaranteed, even with the best trading system you can find.
Becoming a profitable trader is about finding a system that has a positive expectancy and having the discipline to follow the rules of that system on every single trade. Making or losing money on any one trade doesn't matter. What matters is proving your system has an edge, and continually improving your execution. Follow a proven system and you'll make money over time. Process over outcome.
So, no matter how much or how little I have at risk, I analyze every trade with equal conscientiousness. Or at least that's my goal.
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