Recently one of my loyal Twitter followers asked me to write an article about missing a trade that you know you should have taken and the regret that follows the missed opportunity. I’ve got to admit, that this has happened many times to me, especially early on in my trading career. Here are a few points worth remembering that I’ve learned from the myriad of missed trades that I have experienced. First, you need to define your trading system, what it is you are looking for when you are scanning the charts, and when the criteria is met for you to enter the trade, pull the trigger without hesitation.
Now saying that is one thing and doing it is another. I often times have to remind myself that when a chart meets my criteria for trading that I must pull the trigger. A perfect example of this recently was Compton Petroleum (CMZ) which I am solidly up on. Prior to issuing the trade, I came up with a dozen reasons why I should not trade the stock, and none of them had anything to do with my criteria. Whether the stock winds up being a winner or loser is beyond the point that I am making here. What is important is that when a potential trade is on the table, that you take it. Doing so prevents a person from watching from the sidelines as the stock trends positively in the direction of your would-be trade.
So what do you do when you do miss the trade? First, forget about it and move on. None of the “Woulda, Shoulda, Coulda” stuff! It will do you no good and in fact will likely hamper your future trades and make you ultra aggressive on a stock that you should have never traded in originally, all because you don’t want to miss out on another winning trade again (in which you do the exact opposite and take a trade that doesn’t meet your requirements).
And lastly, never, ever, ever, chase the the stock, because 9 times out of 10 I would bet you will wind up either A) losing on the trade ultimately, and thereby taking a larger loss then had you patiently waited to come back to your entry price, or B) had you waited for the stock to come back to your entry price you would have been able to take a larger stake on the trade and therefore profited more handsomely.
There you have it a few pointers on not getting caught up on missed trades and what you can do to prevent it from happening in the future.