Investing & Day Trading Education:  Day Trading Academy

Sept 17th Master Trader Recap: 2.5 pts "Trading from the Loss-Side"

I have the pleasure of introducing another trader that has risen to the ranks of Graduate Master Trader status.  We have a great range of master traders now that are able to capitalize on exceptional market movement.  Everything from traders that trade all day, those that trade for only 10-20 minutes, and others that hold positions a bit longer than most. This trader has begun to develop his own style which is a bit more long term than most of us at The Day Trading Academy. I asked him to do this recap for us because of his uncanny ability to hold a trade.  Great work my man!

A little something I call “Trading from the Loss-Side”

After seeing the market go in one direction for an hour and passing on the first pull back to the mid band at 9:00a CST I got antsy and grabbed a two tick entry…just somewhere around 9:32a CST. A little aggressive for me, but I felt pretty confident with the run up we had. Here’s where it gets bizarre.

I entered the trade and saw it run up a point. So I decided to hold through what I THOUGHT would be a small retrace on the way to +2.00. Two points was always the goal. The market had begun to slow down. My patience is too bad for anything more in these circumstances. However, when the price broke the mid band shifting the momentum back to the short-side, but did not continue down and stop me out–I decided to hold.

I held for 3 reasons:

  1. The magnificent double digit run up to this point since market open.
  2. I have been seeing this type of V3 quite a bit this month. Last one was 11:26a CST on Sept 11th
  3. I had already decided to take a full loss if necessary to confirm that the run to the upside was over.

The last thing I want more than losing was to be tricked into a graceful exit on an excellent trade that just required patience. One of my favorite quotes from legendary trader Jesse Livermore is, “There is no price too high for you to begin buying or too low to sell.” Simply put he’s saying don’t try to guess where the run will end. Just keep trading that area until it actually does end. Today (sept.17th) was a great example of that theory. The market was moving painfully slow, but still going up by a little bit…and up by a little bit…..and up by a little bit more.

Generally I like to manage risk up to 3 ticks, leave it there and then just concentrate on what the target is. I also think loss is relative in trading. If your trading plan is solid (for you) and you have confidence in it and if your account is correctly funded for the number of contracts you are trading then accepting a loss is the ONLY way you can truly win big.

So case and point. I held for 2 and a half hours not because I wanted the two points. Of course I did, but more so because I didn’t care about losing -1.25 points. I just didn’t know getting those 2 points would take THAT long. Whoo!

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