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Robin Dayne
"The Trader's Coach"
16 years as a trading and life coach

Coaching for:
 Individual Traders - all levels
Trading and Hedge Firms
 Brokerage Firms

Trading Mindset Focus:
 Managing Loses
 Establishing a Game Plan
 Removing Mental Blocks
 Reversing a Losing Streak
 Overcoming Fears
 Improving - Consistency,
 Confidence and  Certainty 

"Holding on To Losing Trades"
 
By Robin Dayne

This is one of the most common topics I get with traders. There are about 10-15 that seem to be on the list and this one of the top ones.  This can happen to seasoned trader as well as new traders. They fall into a common pattern of losing more than he should on trades that are going wrong. They hold on and don't get out when they should. At some point it seems all traders go through this in their careers.

They take a losing trade and then stay in, they see their indicators have changed against them, they see the trend even turning in the opposite direction and yet they stay in and watch their cash disappear. What is this mesmerizing power that comes over us? Yes, I too have had this happen. What's even worse the bad pattern of trading continues and the trader keeps doing the same thing over and over repeating the mistake. This can prove to be extremely frustrating and have a huge effect on profitability. 

So what do you do? Try these few things:

First > Set up a plan of attack going into the trade
Second > Reduce size till you are back in control
Third > Work to stay out of ANY emotions (Hint: if you can't do this part stop trading for the day till you can shake it off)
Fourth > Work to minimize the loss and trade in a forward direction
Fifth > Shift your minds focus – with questions

Here is a typical trader comment:

"I have been trading for a few years now and I keep running into this same problem where I am in a trade and then it goes against me and I don't exit when I should, I keep holding on and hoping it will turn around. I never seem to exit when I know I should and ultimately I end up losing more than I should. How do I stop this?" Jerry - Florida

When a trader is in this mindset they will keep giving the market their money each day they hold onto a loser longer then they should. Be careful not to go into the H-W-P mode. (Hope – Wish –Pray mode) This NEVER works.

Look here is the bottom line – If the trade has a plan and the plan isn't working wouldn't be a better idea to exit this trade with a small loss and wait for the nest great set-up? Of course. We don't have to win at each trade but we do have to be SMART at each trade.  Great traders lose, look at it that way.

Next and this is important too. When a trader tells me this story I know right away they don't have a hard stop in.  This is not good because the market, at any time can get away from us, and it always happens when we least expect it. Professional "heavy hitters" use stops so you are in good company. Don't let the EGO take over and think it's not cool to use stops.  STOPS ARE SMART trading.

Sorry for yelling but I really want you to get this, it's important to your success and I really do care that you make it. Really!

Letting go of EGO is a great sign you are becoming a professional trader.  Great traders do not have egos (at least not when they trade) Trading these markets can be a very humbling experience and I am sure this is not news to you.

Good money management works here too. Work to set up some new rules to protect cash. Trading offensively 85% of the time and only defensive if the market throws you a curve.

The market can be VERY seductive and it can be hypnotizing if you watch the P&L especially when you're in a trade. Watching the P&L increase the emotions you experience both good and bad. As well, you may find you are in what I call "Trader's Trace" where the hypnosis mode takes you over and your logical mind goes out the window. When you look at the P&L you run the risk of increasing your emotions which will cause you to react differently than if you had a plan of attack. Great trades are always followed by profits anyway. So keep your emotions in check. By focusing on the trade only.

If this is the mindset you are trading from GET UP and walk out. You are "hooked" and this can be a dangerous place to trade from.

Don't trader with "scared money" and being afraid to lose.  Trading does take risk and know when to ramp it and when to pull back comes with time and experience.  Each trader is so different on how they manage this. You have to find your way too.  

Additionally, repeating the same mistakes over and over sets it into the mind a pattern that creates a knee jerk reaction verses doing, what's logical. The drawback is this bad pattern can get locked in and breaking it becomes even more difficult.  

Key points to be aware of:

1) Don't watch the P&L - take it off the screen or cover it over.

2) Look for a good trade you have done in the past examine it very closely and in detail and then work to repeat that one.

3) Focus – what you focus on is what you will get

4) ALWAYS have a plan and KNOW exactly where you want to enter, how much room you need to give the trade or when the trade isn't working – your stop order and finally your profit target.

5) ALWAYS place a stop and profit target order in at the same time you enter the trade. A "bracket order". If your system doesn't allow this feature than do it soon after you place your entry order.

Be careful and responsible out there……… and Great Trading!

Disclaimer/Nondisclosure 

ALL the information in the Robin Dayne Newsletter is for educational purposes only and is the sole property of Robin Dayne Inc. (RDI) and may not be duplicated, recorded or reproduced in any way and includes: verbal, print, e-mail, or any media vehicle without the written permission of RDI.

This report is a mix of both current market action and educational material on how stocks and commodities trend (move). 

Since mid October I have been on the look out for the market to top or make a multi wave correction. The market did top in January and has formed an ABC retrace (3 wave correction).

The question everyone wants to know is, is this market topping out or just a bull market correction?

Well the brutal truth is no one really knows what is going to happen next. So the only way to make consistent profits in the market is to clearly understand the main technical analysis skills (Chart Patterns, Trend Lines, Support & Resistance, and Volume). You must also understand how to manage your money/trades. I scale in and out of positions during key support and resistance levels to keep downside risk low.

One of the toughest parts of trading is "Trading Discipline". If you cannot take losses easily then trading is not for you. You must be able to exit a trade when your stop level has been reached or you think the trade is starting to go wrong. Holding onto losers will blow up your account very quickly.

Other than those key skills, all you can do is watch the charts and re-evaluate each time a new bar (candle stick) pops up on the chart. Remember to trade with the larger trend of the chart 2-4 times longer than your actual trading chart.

Example: If you trade the 30 minute chart for entering and exiting trades, then you should be watching the 2 hour chart (120 minute chart) to understand the full picture.

Market Trends and Price Movement

As we all know, when the market is trending up we are seeing a series of higher highs and lows and the reverse for a down trend. We also know there are several different ways a market can top before reversing. The charts below show how the market generally moves on all time frames.. Read More

A few weeks ago on February 4th, I penned an article for Kitco forecasting the gold correction trends and the likely outcomes. My opinion was that gold was pulling back to work off excessive optimism from the early December 09 highs. This type of pullback was orderly and there was a gap at 102.50 on the GLD ETF that I believed would fill. The following day, that gap filled and gold hit a bottom at 1042 and has rallied much higher since. I opined that the rally in the US dollar was merely cosmetic against other world currencies, and that Gold was still the preferred asset to accumulate and would begin to move regardless of the dollar moves.

The recent technical move up in Gold only confirms that we are in the final five year window in my opinion where the investing public becomes "aware" that gold is real money.  In my August article last year , I discussed my thirteen year bull theory for the Gold market. The first five years from 2001-2006 was the "stealth bull" in Gold and Gold stocks.  The average Gold Fund ran up 30% a year for five years compounded.  By the time investors figure this out, they all pile in right near a five year peak.  The market then chops for three years sideways in an up and down fashion, getting nowhere.  Investors get bored, and then we move into the final five year stage where awareness takes hold and the bull cycle really takes off.. Read More

From Barron's this week, "Brace yourself for the second wave - the wave of sovereign defaults that typically occurs a few years after a financial meltdown." John Mauldin writes we are between "Dire and Disastrous" and "that Greece is a precursor of a new era of sovereign risk". Claims that the Euro could be headed for total collapse are particularly striking when they come from one of the oldest and largest French banks. In a note to investors, SocGen strategist Albert Edwards said, "My own view is that there is little 'help' that can be offered by the other Eurozone nations other than temporary confidence-giving 'sticking plasters' before the ultimate denouncement: the breakup of the Eurozone".

All this new news is very alarming because it came shortly after European Union promised "determined and coordinated" action to shore up Greece. This lack of action happens because I feel that these countries are constrained in what they can and cannot do. I further believe there will be no specific plan just verbal support hoping Greece will bite the fiscal bullet and rollover their debt shortly.

The real risk here is that if Greece defaults, the 3-4 largest European banks would be bankrupt and that starts a series of markdowns across other nation's bank assets. This screams for more bailouts after more writedowns, mark-to-market and so on etc. Subprime will look like a blip on a radar screen compared to this potential global meltdown.

Normally, countries that are highly uncompetitive are able to slash interest rates and devalue their currencies to prop-up their economies. Does this sound familiar? It's happening right before your eyes here. But this is not possible within the Euro, given its one-size-fits-all economic governance. The implication is that weak, peripheral Eurozone members will have to suffer years of painful deflation and tumbling living standards as well as Draconian budget cuts in order to adjust. Greece has promised to cut public spending $2.75 Billion and raise taxes $6.7 Billion. This can't happen. There will be blood in the streets. Can you just imagine if we tried that here? This monumental change would take a great leader and it isn't Obama or anyone else I know right now. Read More

"If you can Imagine it.
You can Achieve it.
If you can Dream it.
You can Become it.

William Arthur Ward