Regret in Trading

In Continuation with Previous Article

• I wish I would have Exited the Trade When the First Signal to Exit Arose

One of the difficulties of trading is that there are multiple forces at battle in any one moment. Many traders who are buying are able to see why a trade should continue going up even though a major trend line has broken. Traders who are short on the other hand likely see a similar number of reasons why the trend should continue down. Either way, it may be helpful to try and see the trade from the other side’s perspective to neutralize your view so you don’t stubbornly hold on to a losing trade.

• I wish I would have waited for the set-up to materialize before chasing that move

You’ll often hear that traders are tossed back and forth between two emotions. Unfortunately, I think that it is more like one emotion with two heads. That one emotion is fear and traders fear not catching a move and fear closing out a trade and admitted a loss which is a normal part of trading. The best way to get rid of a fear in trading is to admit that you have control over your trades as to whether you get in and out and that you alone decide your trade size and stop amount while at the same time not fully knowing what tomorrow will bring.

• I wish I would have closed out at a 2% loss as opposed to a 20% loss.

A breakthrough in my trading came from the realization that success doesn’t boil down to know what is going to happen next in order to make it in this business. In fact, traders who had a high win percentage but were unwilling to cut the few losers they had stood a worse chance of success than a newer trader with an inferior system that is willing to get out of a bad trade early. Another helpful note is to fear your losses getting bigger than they currently are to give you a proper view of the risk of the market.

Regrets Should Turn Into Your Trading Rules

Once you’ve clearly identified your top 3 regrets, you have something to work with. Specifically, you can turn the antithesis of your regrets into trading rules. This will do two things that will benefit you:

First, you trading regrets are due to trading behavior that causes you pain. Therefore, identifying your regrets and making sure that you’re not duplicating behaviors that cause your painful regrets will make trading less stressful. Secondly, your regrets are due to behaviors that are resulting in losses or else they wouldn’t be regrets so by identifying and taking the opposite action, you will likely plug the hole in your trading plan that is draining your account equity.