In the game of football, one of the most disastrous plays is when the offense is on the goal line ready to score, and instead punching it in for seven points, the quarterback drops back to throw the ball, and gets intercepted, which then gets taken to the end zone by the defensive player. Not only has the offense failed to score seven points, but they have also allowed the defense, which was on the ropes, and on the verge of surrendering to the offense, to take the ball the opposite direction and scores seven points of their own. As a result, you have a 14-point swing in the game (seven that the defense scored and the seven that the offense failed to score). At this point, the entire outlook on the game is changed, the opposing team has found new life, and if they were losing at the time, now has the chance to win the game. Even a field goal would have been much better (which would have at least netted a +3 on the scoreboard).
Take a look at the video below; this is from the 2001 Miami Hurricane football season, when on the brink of losing their bid for a National Championship and a perfect record, the 'Canes find themselves with their back up against the goal line and Boston College ready to score. When the quarterback drops back to throw the ball, he gets picked off by Matt Walters - #91 (Sound familiar? he's the co-founder of SharePlanner too!) who then laterals the ball to Ed Reed for a touchdown. Because of that one play, the 'Canes go on to a perfect season and when the National Championship.
One Play made the difference!
The Connection To Trading
Far too often traders allow for what should be winning trades that are holding some or a lot of profits to turn into losers. Instead of taking what the market gives them, they hold out hope believing that the stock can go higher, and the thought of that happening without them, causes them to take on unnecessary risks. Sometimes, traders even believe that the profit that they are holding isn't worth worrying about because they are so small, but I completely disagree.
Like football you want to come away with something when you are in scoring range. Not every drive results in a touchdown, and sometimes you have to settle for a field goal. Field goals aren't sexy, and neither are 'small profits'. But what I do know is that losses that were once profits are down right disgusting, and should be avoided as much as humanly possible. Now, you are never going to be perfect, but I would encourage you to go back and look at your trades from last year and try to find out which trades you engaged in that could have been avoidable, and in particular, which trades you could have come away with just small profits and then look at the impact it had to your trading results.
Much of trading is mental - and being able to control your emotions and take on a consistent basis, the profits the market, combined with your trading strategy is willing to give you is what separates the successful traders to those who will never make it in the world of trading. You'll have losses along the way, but there is always a lot of room for improvement, and one of the best ways to increase your trading performance is to avoid that dreaded pick-six that you throw the market's way. Because not only do you have to make up for the profits that you lost, but now you have to make up for the losses that you made.
There will always be another trade, another opportunity. Yes you might miss out on the big run that we saw in Nvidia (NVDA) this week (I did!) but that is okay - there will always be another big trade opportunity tomorrow, and another sector or industry that is running wild. But in the mean-time what you have to do, even at the expense of missing the home-run trade from time-to-time, is to guard those profits that you already have.