say …you had few losses in a row … what do you do ?
Do you stop trading for a week ?
Do you change strategy ?
I am very much confused and frustrated at this stage
I have faced 4 losses in a row …and now frustrated.
I invested in Stocks…as you see [B]Global indices[/B] are down for couple of weeks and all my purchased stocks hitting stop losses …making losses to my equity.
(I am doing swing trading based on daily chart…buy …hold for few weeks …sell)
So my question is What do you do when the drawdown starts ?
I think this varies per trader and his/her risk profile. For me, what I do during a large drawdown or losing streak is that I take a quick vacation just to clear my head and be able to evaluate my trading decisions better. I don’t necessarily change my strategy right away but I do review my trade journals and figure out if any adjustments need to be made for the current market environment or if the mistakes are just execution problems on my end.
I think you should walk away and clear your head for sure, wait until the emotions pass and you can think logically. After that you should analyze why you faced losses and see if your strategy needs to be changed or if it was some other factors. Personally I am not sure why you bough equities at the highs, but that is another discussion :).
I did not buy equities at high …I bought some trending stocks on pullback …I bought them after retracement…However you may have noticed how the broad global indices behaved in last 2 weeks ( Dow -30 , S&P 500 … all red )… my stocks fallen …and got stop loss hit.
It all comes down to strategy and time-frame. I think anyone who bought equities over the last four weeks is getting them at a high, but then again it depends on your strategy. I have heavily shorted the S&P from 1,980 to 2,000 and the same for the FTSE when it hit above 6,900. We could see more downside and I am likely to short the rallies. This is just me so do not take it as any trading recommendation.
You said you did not buy at the highs so you have a different strategy and you should stick with that regardless of what anyone says. My opinion is that for now if you keep buying the pullbacks as you say that more stops will be triggered.
I have heavily shorted the S&P from 1,980 to 2,000 and the same for the FTSE when it hit above 6,900.
You may be trading index …but I am trading individual stocks …I trade stocks when I get signal from system regardless of market/broad market indices outlook.
My opinion is that for now if you keep buying the pullbacks as you say that more stops will be triggered.
do you stop trading stocks although your system giving buy signal when broad indices fall ? or you take the risk …also when you start buying stocks again in such situation ? Do you wait for broad market indices reversals to resume further buying stocks as per their signal ? This is confusing and I am stuck to resolve the mystery.
Yes, I do trade indices and you are right that when it comes to individual stocks it can vary as the index could drop and individual stocks can rally and the other way around. I think the best thing you can do is figure out why you have faced several losses in a row and determine if your system needs to be changed. In case your system has performed to your satisfaction lets say over the past two years and you have now faced a few losses I would not worry too much. Still determine what caused the losses and you may find something interesting.
I have learned to trust my strategy when it comes to buy/sell signals, but there is always an exception every so often. Over time you will learn to fine tune it and when you may want to ignore a signal as there is always another trade. This all takes years to learn, create, develop and execute properly.