As we can winning ones for that matter - but would like to focus on the losing in particular We hear it all the time - what did you learn from your losing trade(s) today Well..., what exactly can one learn from their losing trades imo - there is much we can - but would like to open this it up to Y'all before I interject Thx RN
This is the verified equation : MISTAKES + LOSSES = MORE MISTAKES + MORE LOSSES We learn lots of wrong things from professional writers, professional talkers, YouTube... So develop your own holy grail.
Okkkkkk now losses equal more losses. Hmmm got to think that one over. No I don't. Ahem ... I learned, way before today, to look for trades early in the day. Crazy how I used to think it was "safer" to wait till the dust settled. Nope, at least not for me, other way around. Best probs are 8am-10am EDT. Sets the tone, catch the break, maybe even hang on to the daily trend till close or thereabouts. Avoid the fomo got to do sumtim last hour nonsense.
Interesting concept but just how would you build an indicator based on losing trades? Be that as it may, a fictitious mentor of mine once told me that losses are only a means to an end. Never get the two mixed up.
The market changes are random in nature. We cannot know for sure what will be the price tomorrow. We can use mean reversion to our advantage. The price trend will longer when the price fluctuation is smaller. That is to say when price spike, there is higher chance of pulling back. I split the % price change into 16 categories where cat 1-8 is -ve and 9-16 is +ve. Cat 1 is <-7% and cat 16 is > 7%. Most of the data stays near zero. Here is the data spread for the past 10 days. The changes in price are more negative bias. Cut and paste from Excel pivot table. Total market. By sector.
As per with any process in any other field, improvements appear when failures are analyzed. Trial and error has been setting the ground for our civilization for centuries. In other fields the way to success is shared so other can continue the hard work. In trading the way to fail is shared so you can deceive your opponents in the market. For every dime you win in the market someone has to lose it. You are on your own to decipher those loses. But that is definitely the way.
To the question: what can we learn from losing trades? It depends on the trade and the market, can you post an example of a losing trade that you would like to analyze? We will need to set a common ground of parameters with a journal to be able to have an opinion in your trade.
I learned about myself. I don't like losing trades. I dislike small losses and hate big losses. I learned to take small losses quickly to prevent big losses. I learned that when the market turned as soon as I took my loss that in the great scheme of things it didn't matter. Only one trade of many.
Lol, that's easy. Learning from one's mistakes is a cake-walk for anyone with 1/2 a brain and a 1/2 a pulse. But putting it into practice 100% of the time, especially when it counts... now that's a trick. Human nature is a tough nut to crack. And those among you that have never up'd the ante after a decent loss and then lost more.... by all means, feel free to cast the first stone. I won't be ducking any time soon. Base hits win the pennant. That's what I've learned. ~vz
I can take this question in a couple of different ways. The first would simply be to assess if the trade we entered was within our plan. If it wasn't, then an internal audit needs to be made about why we are doing this. I do think for PA traders, there needs to be a bit of flexibility. Its not like an automated trader that can dig into the code and find out why the algo did what it did and fix it with better code. Us human traders probably work within a range actions that can be acceptable. (ie. You can greet someone with "good morning", "hello", "how is your day", and although one of these might be better suited for a particular situation, the fact that you are greeting someone in a warm and friendly way is good enough) Now of course we also have to make sure that we aren't going down the wrong path and trying to figure out why the market turned when we weren't expecting it to. At some point, we have to give in to the fact that we are only trying to predict the future, and this will invariably be a game of probability. So if we expect to have at least 30% losses, we shouldn't lament too much on these losses if they occur within the expected distribution of trades. But the other way I can take this question is if you are asking what can we learn about the market if our trades are losing. For example, if we are taking longs, as they set up for us, and the entry we are happy with, but if the long keeps failing, then what we are learning from the market is that it wants to go in the other direction. So in a way, the result of our losing trade helps set up our next trade. A roulette wheel for example has the same chance of landing on any number, so one spin of the wheel doesn't help you figure out what the next number should be. And one losing bet doesn't teach you anything about the future. But if playing poker, I imagine that since we are able to count the cards, the more cards you see on the table really does help you with your next move. If there is a disproportionate amount of high number cards already visible, I would think there is an edge by taking into account that what is left in the deck are more lower number cards. Likewise, if price enters an area of support and you try a long and it fails, but then you try another long as it sets up, and it fails again, then perhaps you can use these losses to guess that you should stop looking for long setups and instead find where to go short. Of course you can still be wrong on the short side as well, but when price hits a level and bounces off, and that bounce is clean, you wouldn't usually get stopped out. So the fact that your longs are stopping out could be an edge for where the market is going and hence your next trades could be higher probability trades.