Most traders feel extremely “screwed” when in the final seconds of their trade they go from in-the-money to out-of-the-money. Seconds later, after the trade is expired (or stopped out)–and you lost money–the trade is right back in-the-money. In traditional markets this is equivalent to getting high-ticked or low-ticked, which is when a stop-loss is triggered right as the price is reversing back in your favor.
It is probably one of the most gut wrenching and frustrating feelings a new trader can have. “The world is against me!” “The market is manipulated!” “My broker screwed me!” These are but a few of the comments that may go through your mind. Your words will likely be more colorful though.
While extremely frustrating, there is no real way to avoid this. It happens to successful traders all the time.
Think of it in different terms. While you lost on the trade, your overall outlook was correct. Anything can happen at any given second in the market. All we can do is find an edge that works for most of those seconds. Occasionally though, a big buy or sell order will come in, just pushing the price out-of-the-money at expiry (or triggering a stop loss just before the reversal).
This is unavoidable. We can’t control the market. We need accept that this is part of it.
To Change or Not to Change
After a frustrating ordeal, the human tendency is to begin to change things. If overall you have been making money, and have a solid plan, don’t let a frustrating situation like this sway you or rattle your confidence. Stick to your plan. Accept that sometimes even when you are right, you won’t make money.
There is a random element to the market which can’t be studied or analyzed away. Losing trades happen. When you test out a trading system you may be right 6 or 7 times out of 10. Do that consistently and you can make a good income. Notice how the losing trades are already factored in? You can count on losing 3 or 4 trades out of 10….and you can still be profitable.
Why the loss occurred doesn’t matter. Don’t sweat it. As long as you follow your plan, expect that you will win about 6 or 7 trades out of 10 (varies by trader and strategy of course) and you will lose about 3 or 4 out of 10.
If your win rate is low, or you are losing money overall, then something does likely need to be done about your strategy.
First, address whether it is actually your strategy at fault or you. Sometimes a strategy works fine, but traders skip signals or don’t actually follow the plan precisely when trading. If this is the case, work on your metal game and build your disciple by relentlessly following your plan even when you think you shouldn’t.
If the strategy isn’t working, then consider how your entry and expiry times could be adjusted to produce more winning trades. If you entry points look good in hindsight, then it is choosing the expiry that needs work. But if your entry points are “in the middle of nowhere” and the price is zigzagging back and forth across it, then your entry points likely need to be fined tuned. Move the entry points to more significant price areas, based on indicators, trendlines, support, resistance or price patterns.
All traders get that feeling of being screwed when a trade causes them to lose money at the last second. Unfortunately, that is part of trading. It happens; take some solace in the fact that you were almost right. Therefore, don’t start changing things just because of one frustrating situation. If you have a good strategy, stick to your plan. If you don’t have a good plan, do the hard work of making it better instead of blaming the market or your broker.