The most painful trades are the ones we miss. Here is a spectacular one. Yet, it was wrong…

Sometimes, the most painful trades are not the ones that, following our trading plan, produce a loss.  Rather, the trades that we miss and eventually produce fantastic returns are the ones that are hardest to digest and forget.  I have had one of those recently… but… there is a but…

On the evening on March 18 (trading day of March 19), I saw a tiny pattern forming in the E-mini (S&P 500 futures) and I decided to take a little gamble, short 1 contract at 2,749.25 and risk $150 to 2,752.25… which, in this volatile market, it’s a true gamble, because the odds were totally against me.  Occasionally, I don’t mind a gable, intraday stop, sub $250 risk.   To jump to the end of the story… this is also the only consolation I have, namely that the trade wasn’t part of my standard trading plan.  It was a gamble.  In fact, it is this type of random lucky trade that only increase the potential for trading addiction I have mentioned before and leads to the infamous death of 1,000 small cuts.

While I started outside of my trading plan, once the trade worked out, I decided that the gamble paid off when it more than tripled my return on risk, touching 2,429 overnight (+$1,000) and when it started to retrace.  A 50% retrace of the timeframe used for the pattern’s stop, was a signal for me to get out.  I exited with a $388 profit. More than double my initial risk.

Having said that… You can see how one trade can change everything… when you look at the chart,  my entry was never tested, my stop was never tested… and over the next two trading days I missed out on the opportunity to make an additional $7,575!!

SP 500 Miss

Trading can be an emotional rollercoaster.  It is the reason why machines and algorithms often do a better job than discretionary traders in executing a plan.  It is important in these situations to recognize that the outcome of this trade was independent of my plan and a complete stroke of luck.  The sooner I can forget about it, the better off I will be.  I will continue to allow myself to have these small gambles, but I can’t let this trade influence me in taking more risk than necessary by doing them too often.  Once or twice a week is more than enough, with the size of account I have and the relatively small time frames I’m working with.

What’s been your biggest missed opportunity?

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