Two costly mistakes I made this week that I want to warn the profitly community about:

 

1. Not setting a stop loss on a stock position (protection)

2. Chasing a trade (revenge trading)

 

Not setting a stop loss on a stock position

I entered a position in CX this week. I had scalped this trade twice in the past and made some nice returns so I figured I could go into it again. The fortunate and unfortunate part about this trade is that I would have won a third time had i sold it when I initially thought to (have a trade plan before entering every position). Instead, I held it and watched the trade go against me. What killed me with this trade is that I didn't set the stop loss. I typically always set a stop loss on 99% of my trades. With this trade I didn't because I was on my computer monitoring the trade minute by minute for a few days. Unfortunately my 9-5 job required my attention and was unable to monitor this trade on the day that it went drastically against me. I then found myself in a losing position far passed what my stop would've triggered. I ended up selling quickly, licked my wounds, and took it as a lesson learned.

 

Chasing a trade (revenge trading)

I trade oil futures usually scalping it. I will take both directions in this trade in depending on technicals and price action. Because of this the trades are quick and sometimes I do not have time to set the stops. In one scenario I took a significant loss on a scalp and wanted to make it up so I entered a series of quick trades. I won 2 and loss 2 revenge trades. overall i took bigger losses than i did gains. Overall my portfolio took a 9% hit on those two positions alone. 

Lessons Learned:

Always, always, always set stop targets. These are to protect traders and should be used as your insurance when you are in the market.

Always have a plan when you trade. If you go into a trade as a scalp, do not change the trade into a swing trade or anything other than what your initial thoughts were. This is the equivalent of trying to change the rules of the game in the 9th inning. Don't do it. Stay disciplined, use your rules on every trade, and eliminate distractions. Focus

Do not revenge trade even when you have a strong conviction. There are thousands of stocks that you can trade when a trade go against you in a particular stock. Learn to take a loss on the chin and regroup and refocus on your other plays. 

Good luck and I hope that this blog helps everyone that views it. 

 

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