What Makes a Trade Good or Bad?

By | May 18, 2021 3:33 pm

In this Article I will Focus Upon Bad Trade/Trading. We have discussed a Lot about Good Trades and Good Trading Habits. In This Article I will share my conversation with one of my Students on Bad Trading.

The most common statement I hear from new traders is:

  • “Damn, I sold that stock too early. It went up after I sold it.”
  • “I was scared to buy XYZ because I thought it would trade lower.”
  • “ I Bought up and XYZ traded against me. What a stupid trade!”
  • “I am Going long as everything is Rising  The stock is going higher.”
  • “I am going short as Corona Cases are increasing Many Folds,No way Markets can go up”

Here’s how a typical conversation with a new trader usually goes during our 1×1 Coaching:

Trader: Sir I again Made a Less Profit Today in comparison to What could i have made

Bramesh: “What was your trading plan?”
Trader: “Reliance was holding the its 15 Mins Support so I got long. I was going to sell when the stock traded higher and slowed. I sold the stock when it slowed. But it traded a 10 point higher after i Exited.”
Bramesh: “Why was that a bad Trade? That sounds about right.”
Trader: “Well, the Reliance traded 10 point higher.”
Bramesh: “So why does that mean you made a bad Trade ?”
Trader: “I missed out on a whole 10 point of the move.”

Most of You who just read the above will wonder why I am not in agreement with the Trader as he missed out the 10 points move.

If the new trader followed his detailed exit plan, then he made Good Trade. This is great! He did his job! Now the new trader may have been slow to reenter to catch the next upmove, with a new  Trade, but his original Trade was correct.So Trader has to improve on his skills of renetry.

Consistently profitable traders just make good trades. They accept that they cannot control the results

 

If we see an opportunity soon after Good Trade, then we will immediately re-enter. Trader did a poor job of establishing his exit plan. Once a trader realizes this, he should know where and how to fix his problem.

A Solution which we provided was

  • A daily journal with detailed write up of trades taken during the day and what could trader improve on was suggested .
  • A plan for every trade.
  • Favorite  Trading setups were identified.
  • Goals were set on daily and weekly basis.
  • Positive Affirmation were written and repeated everyday

“It’s about doing the little things every single day and making yourself better, and that’s my goal. My goal in this part of my life is to get better every day. If I do something every day to make myself better, I know eventually my P&L is going to show.”

Do not judge a trade based upon its results! A profitable trade may or may not have been a good trade,  A loser may have been Good Trade. If your fundamentals for a trade are sound, then that is Good Trade. Consistently profitable traders obsess about making Good Trade and not money.

 

 

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