Getting stopped out of a trade only to have it work
I receive many inquiries from Factor Members on the subject of getting stopped out of a trade only to have it turn around immediately and work. This has happened to me hundreds of times over the years. Does it bother me?
It once did – but I matured as a trader. Getting Stopped out of a trade only to have it work is the price to pay for protecting trading capital. It comes with the territory. It is the cost of being a
good risk manager. I put getting stopped into the following perspective:
• The overwhelming proportion of my net profits as a career trader have come from trades that never experienced a hard retest
• There have been hundreds of great trades in the past and there will be hundreds of great trades in the future (if I am around long enough to experience them)
I have the incredible benefit of data from thousands of actual trades. Using active and aggressive trade management guidelines does cost me some good trades. Based on my data, allowing trades more wiggle room would increase my trading profits by about 20% per year. Yet, I have hard data proving that active and aggressive trade management doubles my Profit Factor and Gain-to-Pain Ratio. I believe this trade-off between net profitability and asset volatility is completely worthwhile.
What about being wrong publicly?
In the world of the blogosphere there are distracters and there are people who really want to learn. I am so appreciative of all my readers who want to learn about the markets and trading. I so often see the earnest readers of my blog come to my defense in reply string when a distracter wanders in. I appreciate that. But, remember, everyone has an opinion and that is what makes the market what it is. People have the right to think I am clueless. That is ok, as long as they are polite in the reply string.
Peter Brandt is a 40+ year veteran of trading. Through his Factor Service, members receive:
View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work. Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about. For more information watch my 30 minute webinar where we cover the Factor service in depth.
I hope you will consider joining the Factor community.