Trade The Market, Not Your Expectations

True to form, November has proven to be just as lucrative as in previous years. I’m currently in the midst of another winning streak after finishing up my twelfth green day in a row, my sixteenth for the month, and I’m looking to finish November with about $65k net, almost all of which I made during this green streak.

Even though I am up toward the high-end of my average monthly profits, November actually started with me wiping out my first week of profits. That one red day put me on the defensive, which in turn helped me start this streak I’m on now, even clocking in a couple $20,000 days.

That process — having a big loss or a couple small rough days, playing it safe, then hitting a new streak — has  actually become something of a pattern recently, and it’s something I’ve touched on before. It obviously makes sense intuitively: if your strategy is no longer working, you either continue losing or you change your strategy.

However, I’ve also tried to not make that pattern a rule in my mind. If I’m expecting an upset every time I get on a streak, I’ll probably start having a lot fewer streaks.

That persistence is why I’m still on this current streak, since I was actually close to having a $2,300 red day on Wednesday. I won’t cover the whole day (since I did in that racap video at the link), but I typically make a habit of walking away from my trading station after taking more than $2,000 in losses or having three bad trades in a row. I stuck it out despite the loss because I was seeing some stocks squeeze up nicely and I new the volume and buying support was out there. I ended up finding it in Alliqua Biomedical Inc. ALQA for $3,700.

I will be fast to caution traders from trying to dig themselves out of the red by revenge trading or averaging down. I’m not especially happy with Wednesday’s results, but I am happy I pursued that trade in ALQA. I was confident in the set up, and that confidence paid off.

And, while it didn’t play out quite like the loss/streak/strategize pattern, I was still extra cautious on Thursday not to overplay my hand, using risk management strategies to scale into positions and cushion myself any outsized losses.

I guess my point is: don’t settle for anything short of your best, but don’t get carried away with how good you think you are. Successful traders are aware of the risks and rewards of a given trade, while unsuccessful ones are too caught up in patterns to adapt.