How To Deal With Positions That Go Against You For No Reason

[Brendan Egan]

I would say that law number 1 of the price action trading course, of my personal trading rules, and of trading in general is that the market is always right. With that being said, there are times that we feel as if the market is wrong because our analysis just doesn't work for what the market is currently doing.

Case and point: Not too long ago I had a position that looked like a picture perfect entry. I used one of my 10 trading strategies outlined in the price action trading course and I thought it would be one of my better trades of the year. Soon after entering into the position, it went against me and went against me fast. I didn't have a hard stop loss in place because I was monitoring the trade, and I soon got out of the position with about a 1% loss. The stock continued to go against me after I exited, and ended up falling some 3 or 4 percent before it was all said and done.

Now why exactly did the stock do this? Well, I have no clue first of all and secondly it was something that I was certainly not expecting. Being a trader for a few years now, I remembered that while this one position and one trading strategy just went against me, I can think of a handful of times that it went in my favor. In fact, I estimated that using this one trading strategy my positions went in my favor about 7 times and went against me about 3 times, so it had about a 70% success rate.

So while I am a more experienced and more psychologically sound trader, I knew that this one losing position didn't mean that the trade setup wouldn't work anymore or that I was screwing up as a trader. We can perceive the market as irrational at times, meaning it does things we never thought it would do. However as long as we have a time tested trading strategy, in the long run everything will pan out.

This post is designed more for beginner and intermediate traders who are sitting there after having a losing position questioning their method. I know I went through this and every single trader out there has gone through it at some point in time. Rather than question your trading method (assuming it is a reliable one like the ones taught in the price action trading course) then everything will pan out in the long run. It is super important that rather than questioning the method you spend time to look at what went wrong, understand why, or understand that it might just be one of those few trades that you can't explain. Either way, it is super important to put the trade behind you and get ready for the next trade, because it is always right around the corner.

[Tomross58]

You bring up some really good points. I struggle with this as most times in life when you put forth good effort and study and plan the result will usually come out positive. Not so with trading, and as you say the markets are always right. Trying to keep the emotion out of my trades is something that I am working on developing. I believe the only thing we as traders can actually control is our exits. Sounds like you did great management. Is a good trade one where we make alot of money or where we follow our plan reguardless of what the market does? For me having a pre-concieved notion that the trade will work this time or everytime is teaching me some valuable lessons about risk/money management. Good post

Tom

[Brendan Egan]

You bring up some really good points. I struggle with this as most times in life when you put forth good effort and study and plan the result will usually come out positive. Not so with trading, and as you say the markets are always right. Trying to keep the emotion out of my trades is something that I am working on developing. I believe the only thing we as traders can actually control is our exits. Sounds like you did great management. Is a good trade one where we make alot of money or where we follow our plan reguardless of what the market does? For me having a pre-concieved notion that the trade will work this time or everytime is teaching me some valuable lessons about risk/money management. Good post

Tom

I agree Tom. Check out the Positive Loser lesson in the Price Action Trading Course again it touches on a lot of these topics and really is a great lesson for this type of thing.