As traders markets will often frustrate us. This is normal and especially so in the beginning of a trader’s journey. If you stay in the game long enough and are serious about trading, you will eventually find ways on how to deal with them.
But every now and then markets will do something outside of the normal noise of price fluctuations that can even surprise some of the most experienced traders out there. See chart below:
Can you see that big spike as pointed by the arrow? They are not too uncommon (especially in the forex markets) and many reasons are usually thrown around as to what causes it, but for me the reason behind it is not so important. What is important to me is that charts such as the one above serves as a reminder to me that anything can happen in any given market at any time. To remind me that no matter how good a trader I am, no matter that I always follow my trading plan, no matter how much unrealized profits I have on any trade, that the market can turn on a dime and do the unexpected at any time.
If you were long for whatever reason in the chart above and got stopped out due to that spike, how would you have reacted? Imagine your two previous trades were losses and with your third trade you were long with open profits in the chart above and that spike stopped you out. How would you have reacted? Would you think the market is out to get you? That it has a vendetta against you. That it always singles you out. That your trading strategy is flawed and you need to look for another one?
But I always try to remind myself when I see such a candle, that there were many traders active during that same period. Some might have had a trade on already, others might’ve been wanting / waiting to get in, while others still had orders placed in the market and so on. Some of those traders were professionals, some intermediate and some amateurs. All those traders trade with different time horizons and have different strategies. Some were long (stopped out for a loss) and some were short (possibly with some nice gains).
What I’m hoping you get from what I’ve said above is that you are not the only one trading on any given day. There are many and all sorts of different traders involved in the markets everyday. So if you are stopped out of a trade, whether it is because of a big and rather unusual spike as the one above, or whether it is just a normal trade that went against you, that you are not the only one, that there are many others also taking a loss; taking losses is just part of the game. What is important though is whether you followed your trading plan and whether you will stick to strategy going forward, or abandon it because you think it’s not working and the market is just out to get you. Are you going to side and act like the professional traders and have faith in your strategy, or with the amateurs and abandon it?
Anything can happen in any market at any time. There are many traders involved in the markets along with you at the same time. When you have loss, you are not the only one. How you decide to deal with it is up to you, but blaming the market is pointless as it will just keep on moving with or without you. You can stick with your strategy – like the professionals will – and next time you might be positioned on the right side of a big move. Or you can abandon your strategy (like many beginners) and continue on that endless search of the holy grail trading strategy.
Hope you enjoyed this post and thank you so much for reading.
Thanks and Regards,
Trading SOS SOS