Take Every Single Trade

Do you know which trade is going to be a winner?

Do you know which trade you are placing will honor it stop loss price avoiding a larger loss?

The answer, of course, is no.  We never know.

Since we don’t know which trade will be the one that kicks our trading account into high gear, what is the one mistake we can never make?

Do Not Miss A Trade

When a trader misses a trading opportunity, they run the risk of skewing the expectancy of the trading strategy and can turn a true winning system into a losing one.

In the article 3 Tips to Improve Trading Performance Now , I talked about the importance of tracking every trading error you make because that is the only way we can find out how we as traders can improve.

Missing a trade is an error and that error can have a serious impact on your trading performance.  It can turn your winning strategy, into a losing one.


Your Testing Does Matter

When you did the required testing on your trading strategy and trading plan, you were no doubt diligent in ensuring that every trading opportunity that showed up that followed your trading plan, was logged

You then had a large sample of trades to review.

Once you saw a positive expectancy over time, you committed money to the strategy.

But that positive expectancy was taking every single trade and following the rules for management.

Yes, real life trading is different especially if you are part systematic and part discretionary in your trading approach.  There will be some variance.

But don’t make the variance an intentional one by missing trades.

What If You Miss A Trade?

Perhaps it was lack of focus, work commitments, or were simply distracted, some trades were missed. Too many missed trades will create a big performance discrepancy between back-tested and actual trading results.

When I talked about tracking errors, that was so a trader could come to grips with the issues and look to fix them.

Logging missed trades has the same result.

Only by looking at the trades you missed can you look to solve this problem. Even if it was a one off mistake – log the missed trade even in your trade journal.

By doing so, you can figure out why you missed a certain opportunity:

  • Were you tired and unfocused?
  • Distracted by other markets?
  • Up or down on the day and called it quits?

Whatever the issue is, taking notes at the time of the missed trading opportunities is going to help you pinpoint any recurring themes.

Miss too many trades, especially the large winning trades, and your inconsistency will turn your positive expectancy trading strategy into a losing one. Given that a true trading edge is hard to find in the markets of today, being consistent with a proven trading strategy is vital.

When can you miss a trade?

At Netpicks, we use “POQ” or Power Of Quitting.  This is a tested approach where you shut trading down depending on the outcomes.

Some examples:

  • 1 win and done
  • Time limit
  • 2 losing trades

These are written into the trading plan and are not done on a whim.

The data for the plans these are in, has been reviewed and it is the best way to handle the strategy in those markets.


Dangers Of Missing Trades

Another important reason you’ll want to minimize the number of missed trading opportunities is a psychological one.

In Why Pros Don’t Chase Trades we touch on the fact that when you miss a trade, it’s easy to be sucked into chasing the market.

The fear of missing out can create strong trading urges and put you in situations where you’re taking what you recognize as poor trades. Of course, there are always chances that realistically we can’t take advantage of – but those that we miss when we shouldn’t have are the ones that can trigger emotion-based trading.

The danger with missing a trade and then chasing a trade is the chased trade becoming a winner. Being rewarded for what can only be described as trading errors can set you up to having your poor decisions reinforced. It is only a matter of time before those errors take you out of business.

You can only play with fire so many times times, before you get torched.


Making Money

Clearly money is a big motivator in trading.

Losing money or missing out on money tends to be easily forgotten if you don’t have strong performance tracking and review routines in place.

  • Part of this could be down to the ambiguous nature of some discretionary trading methods.
  • Part of it is because memories where strong emotions are involved, tend to get blurred.

However, by pinpointing exactly what you’re doing that’s holding your trading performance back, there’s a huge incentive to lean on your experience with the system rather than your trading urges.

By keeping detailed notes, you won’t get stuck in “recency bias” but will have pages of documentation that shows one way is better than the other.


Be Vigilant

By remaining disciplined enough to track missed trading opportunities on a daily basis and aware enough to identify exactly why this happens, you’ll be adding a new dimension to your trader performance analysis.

In any market that can be traded 24 hours, it can difficult to hit every trading setup around the clock.  But, you have accounted for your trading hours in your trading plans.

Once you understand how to take the trades that the market offers you on a more consistent basis, you’ll elevate your performance to the next level.

Not only will your performance improve, but so will you account size.