Take Another Trade?

At Netpicks, we encourage every trader to have a daily profit target or a set number of trades to take on any given day. We call it the Power Of Quitting.

While there will be days you end up leaving a lot of money in the market, there will be the other days where you will save yourself losses and frustration.

You won’t always be able to take everything that’s there when the markets are good, but if you know when to push a trade, you’ll probably see some of your good days turn into great days.

There are days where you will have to weigh the risk of taking another trade and the chance of losing what you’ve got.

Our instincts are to keep going.

Over time, you’ll probably realize that the instinct is not helpful.

Should You End Your Trading Day?

If you don’t have a built in shut off trigger in your trading plan, we’ve broken down the answer to whether you should stop trading for the day or not to four variables:

  • Have the market conditions turning sub-optimal?
  • Are you starting switching off mentally
  • Are your emotions making the decision?
  • Is the “I should’ve stopped” syndrome setting in?

Let’s take a brief look at each of the issues before moving on to how to decide whether to continue.

Market Conditions Turning Sub-Optimal

This is perhaps the most obvious issue when it comes to pushing yourself in attempting to have a “big” day. Sometimes there’ll be some good movement early on due to economic reports for example and sometimes there’ll be market moving speakers which temporarily elevate the level of volatility.

When the smoke clears though and the markets begin to crawl, if you’re still trading it like it’s moving well, you could find yourself in trouble pretty quickly.

Switching Off Mentally

There are two parts to this.

  • You have literally switched off after hitting an acceptable or good target. You’re no longer monitoring the markets with the same levels of attention and your mood has become relaxed. Trading from this point on is potentially devastating if you’re not careful. You could well end up turning a decent up day into a big down day.
  • You’ve already exerted a lot in terms of effort and emotion. The same applies as with the first aspect although you’re far less likely to want to continue to trade. If you’re not sharp or able to concentrate, your odds of trading effectively decrease significantly.

Being Emotionally Opposed To Continuing To Trade

Let’s say you’ve had a bad run, or maybe it’s Friday afternoon and you’re looking forward to the weekend. You’ve made a decent profit and you want to bank it. If you’re on a bad run, turning it around is something that needs foundations to build upon and regaining a level of consistency is the all important factor.

One good day in these circumstances is good, but it’s more important to get on a roll of positive days. In terms of it being Friday, well I know when I’ve lost a nice profit the weekend has not exactly been fun. It’s a difficult thing to stomach as well when you’ve given up a profit like that.

When you’re at that point and you want to stop, your emotions are heightened. Trades are less likely to be as objective. Every tick against you becomes an emotional drama.

“I Should’ve Stopped” Syndrome

When you’ve wanted to or felt it might be good to stop but you’ve carried on trading and lost it all, it’s pretty easy to beat yourself up about it. There’s no bias to this feeling.

What I mean by this is that whether or not you did the right thing and traded in the right way, because you felt unsure about continuing to trade, your mind tells you that you’re a bad trader!

Some common (and destructive) thoughts:

  • “I was too greedy”
  • I was dumb to carry on”

To break out of this train of thought, it’s beneficial to go back to your trading journal if you keep one, at a time when you’re less stressed and tired. It may be that your trading was poor, but even good trading that resulted in losses can feel terrible in these circumstances.

Keep On Trading?

I hope it’s apparent that the problems are potentially numerous in pushing for a large day, but if you become skilled at identifying when to push, it can make a really big difference to your bottom line.
So to decide on whether continuing to trade and push is justifiable, you must consider the points above.

To work out if the conditions are ripe, you must not only have a firm handle on the way you monitor the markets and how they are trading, but you must also ensure you are aware of what the best conditions for your trading system are.

It could be that your trading system would not perform well on a day when price is strongly trending or it could be that the same type of market is ideal for the strategy.

You must also be able to objectively determine what your mental and emotional states are throughout the day and in particular, at the point where you make the decision of whether to continue or not.

Lastly, you must decide how you will trade it if you do.

  • Will you halve your position size?
  • Will you stop if you lose half your profits?
  • Will you trade all of the same setups as before?

All of these things have the potential to help protect you from the “I should’ve stopped” syndrome. Whatever you decide will work for you, you should consider doing it.

Author: CoachShane
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.