Here is a critical review of a recent trading mistake. I figure the best way to hammer out my personal set of trading rules is to analyze my mistakes when I deviate from the rules I am trying to establish.
- Stick to your trading time frame! If you are a swing trader that focuses on daily price bars, wait until the end of the day to trade. That way you can be relatively sure of what the closing price will be. This is the best way to confirm what you are seeing on the daily bars. Take my recent mistake for example. I traded a daily candle in the middle of the afternoon, well before the candle was confirmed (and closed above support).
- ALWAYS know your initial stop loss when you enter your position, and enter that stop loss as a pending order. This way you can avoid the emotional mistakes I made on this trade. I saw a break below support on fair volume, but my stop loss condition still would not have been activated at the price levels PLCE reached on Wednesday. Why did I sell for a small loss then? I got emotional and panicked for lack of a better word.
Those are the two main takeaways I got from this trade as of now. I may look back and find some more mistakes I made. In the end, I should not have sold when I did. Thankfully, my risk management rules were not violated. Because I like to start with relatively small positions and add to them as they behave the way I want, I did not loose much on this trading mistake. It was a mistake nonetheless.