Hey — we all do it from time to time.
We take a trade (I don’t care if it’s from tip, a trade system signal or what) and it doesn’t go our way — and when it comes time to close out — we break our very own trading rules and we don’t shut it down.
When I do that, and I’m caught in a nasty little game of deceit with myself, there are a few things I watch for to clue myself in to what’s going down.
To be honest, these might seem like silly guideposts, but they have worked wonders as far as self recognition and closing out losing trades is concerned.
1. I stop opening up my charting software
I just don’t want to look at it. Don’t want to see the ugliness that has become my stock position. I don’t want to feel the grief.
2. I stop going to my brokerage account
This is similar to tip one and it’s a big red flag. If I was doing everything the way I should be doing it I would have no trouble going to my brokerage account and seeing what’s in there.
3. I start wild, message board battles
Yeah, do NOT talk bad about my trade when I am in denial mode. I will open up a world of hurt on you about how an earnings rumor from so-and-so coupled with insider buying by officers LAST YEAR and an analyst upgrade that happened MONTHS AGO that will prove me right — eventually.
4. I start using crazy indicators on my charts
Weird Fibonacci arcs, time series, tea leaves! Whatever the case may be — these are not indicators I have ever used in the past and will never look at again. I’m just hoping I find something in any of them that says breaking my rules is okay.
I can’t close this trade now — the Gann Fan is intercepting with the Fib arc while diverging with the time series!
5. Telling everyone I’ve opened a new long term trade
If you ever, and I mean EVER hear me say this one then laugh me right out of the room. Unless I say so right out of the gate (I’m currently trading a system that requires 1 year holds minimum for positions), then any “long term hold” might as well be labeled an “I broke my rules hold” and was too wimpy to close.
Anyway…those are my dead giveaways. Maybe you have yours. If so, let me know!