Forex traders who want to be consistently profitable know the importance of keeping track of the right and wrong of the trades they take.
Unfortunately, the impact of deals they don’t take is often overlooked.
Traders are no strangers to missing out on good trading opportunities. At one point or another, we’ve encountered setups that we didn’t make even though they clearly fit our own biases and strategies. Often, those missed deals also tend to be winners.
There are a lot of reasons why we fail to get good points. For example, Steve could have chosen to remain neutral after losing a deal or two.
Tony could have been distracted by another trade while Peter lacked the confidence to pull the trigger because his prejudices did not match those of his friends.
Meanwhile, Natasha had met her daily quota and stopped trading while Clint did not have enough credit for another trade.
While there are good reasons to miss out on business opportunities, Not making the right settings may cost you in the long run.
First, you’re slowly ruining your account by not making entirely good settings. Opportunity costs can add up and you won’t even know how much potential profit you lost unless you keep track of it in a journal.
For mechanical traders, not taking all valid trades would create discrepancies between your tested results and actual performance. You may lose confidence in your system before you give it a chance to reach its full potential.
Missed trades can also affect your trading psychology. If you make yourself believe it’s okay not to enter trades after a losing streak, you’re falling into the trap of recency bias.
Losses are part of trading and the results of your past trades should not affect your decision making skills in your future trades.
The final and perhaps most dangerous effect of missed trades is their tendency to lead traders to take revenge trades.
Traders who miss a good opportunity tend to “make up” for it by taking a less-than-ideal setup and possibly trading more aggressively while they are at it. As I mentioned before, revenge trades can kill your account one trade at a time.
So how do you reduce missed trades? Here are four ways:
memoirs
It’s hard to address a problem if you can’t see it. What made you hesitate? Are you distracted? How many times has a couple walked the path of your system? What could you have done to avoid missing out on these kinds of opportunities?
Recording your missed trades in a trading journal can help you identify your triggers and push you to stick to your plan in the future.
Set alerts and commands
If you don’t have time to watch your charts or aren’t around when good opportunities usually appear, consider setting price alerts or using entry orders for your trades. You can even step it up by designing a simple mechanical system on your platform.
Reduce your deal sizes
If you miss out on most of your good trading ideas because you lack the confidence to accept them, you may want to reduce your deal sizes. This way you will reduce the stress of trading for money.
Of course, practicing good risk management techniques can go a long way in boosting your confidence.
Look at the big picture
Accept the fact that losing is as much a part of trading as it is winning. One or two losses won’t matter if you trust your system and look at the big picture.
Getting used to losses is the only way you can focus on the process rather than the profits.
Traders ignore missed trades simply because they don’t see their impact. Unlike the losing trades they make, missed trades are not usually recorded in spreadsheets with the intention of minimizing them. Unfortunately, you can’t improve what you can’t see.
Comments are closed.