I hate that phrase, but unfortunately it is true. Streaks be they good or bad do eventually revert to the mean. I had a friend in a secondary business interest tell me that yesterday when describing an unfortunate turn of events for him with a major client of his. As much as I wanted to spank him for the negative comment, I thought to myself that in the world of trading we certainly see plenty of evidence to support that view. Above is my GOLD long that I have been sitting on for awhile. I just got stopped out this morning on my trailing stop without reaching my profit objective. The profit was $1900 per contract so not a disaster, but not what I was hoping for. I decided to tighten up the stop going into today since we had a small range day after the big outside bar, and POOF they got me.
It is ok, I do not mind being out of this trade. Most of the trades I do never reach my full target objective. Targets are mostly plans in case everything works out great, which does not often happen in trading. It does at times, which is when the big money is made. Other than that you just grind it out hoping to bank a schilling here and there. I had an inkling to take this profit yesterday during the day and should have, it would have been another grand per contract or so. Usually when those gut feelings hit me I should go with them due to how uncannily accurate they have been over the last few years. I try and fight them because they are based on emotion at some level, and I do not like making emotional decisions when it comes to this business. If I can ever figure out how to tap in to the subconscious aspect of where these gut calls comes from, maybe I can quantify them. Until that time though, I will for the most part pass on them. There is one exception.
The exception is when I am out of the money in a trade and see that there is no point in just blindly sitting there and waiting to get stopped out. In these moments I just go to the market and take my medicine. This way I keep my losses smaller. The trick of course is how to know when this is the case and how to know when I am not just being emotional and reacting in a knee jerk fashion. This has mostly to do with reading the entire situation that is going on, and making a reasonable decision. Going back to last week and my post on exiting my Swiss Franc short early was a perfect example of this. You can go back to that post, it was last week but I do not recall the exact day. It was clear to me based on how everything else was moving and it was not, that I had made a mistake being in that market, so I exited. That trade was a profit, whereas most of these types of instances are losses.
I cannot count how much money doing these types of things has saved me over the years but it is immense. However, when I first started out, it cost me dearly. For those who are just starting out trading, I would not suggest doing this. I think you should stick to your rules come hell or high water. Once you get a little bit of a feel for how to do this, then MAYBE you can explore adding this type of option to your repertiore. However, for the most part I do not recommend it and still feel it is a bad habit even though it works for me.