{"id":4553,"date":"2016-07-14T08:27:09","date_gmt":"2016-07-14T12:27:09","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=4553"},"modified":"2022-04-06T15:05:01","modified_gmt":"2022-04-06T19:05:01","slug":"three-trading-psychology-tips","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/three-trading-psychology-tips\/","title":{"rendered":"3 Valuable Trading Psychology Tips From Our Loss In $SQQQ"},"content":{"rendered":"<figure id=\"attachment_4554\" aria-describedby=\"caption-attachment-4554\" style=\"width: 285px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-4554 size-medium\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2016\/07\/psychology-285x300.jpg\" width=\"285\" height=\"300\" alt=\"\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2016\/07\/psychology-285x300.jpg 285w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2016\/07\/psychology-105x110.jpg 105w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2016\/07\/psychology-768x808.jpg 768w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2016\/07\/psychology-973x1024.jpg 973w\" sizes=\"auto, (max-width: 285px) 100vw, 285px\" \/><figcaption id=\"caption-attachment-4554\" class=\"wp-caption-text\">The mind of a trader<\/figcaption><\/figure>\n<p><em>Knowledge has to be improved, challenged, and increased constantly, or it vanishes.\u00a0<\/em>&#8211;\u00a0<a href=\"https:\/\/www.brainyquote.com\/quotes\/authors\/p\/peter_drucker.html\" target=\"_blank\" rel=\"noopener\">Peter Drucker<\/a><\/p>\n<p>We couldn&#8217;t agree more, especially in the business of stock trading; the more you learn, the more you earn.<\/p>\n<p>As such, much\u00a0of the knowledge we share on this blog focuses\u00a0on recapping technical\u00a0chart patterns\u00a0of\u00a0past stock and ETF trades that led to successful, profitable outcomes.<\/p>\n<p>However, equally <strong>priceless\u00a0lessons can be learned<\/strong> by walking\u00a0through\u00a0<em>losing<\/em> trades that did not work as expected.<\/p>\n<p>In this article, we share three insightful, psychological tips (or reminders for experienced traders) from our recent losing swing trade in $SQQQ.<\/p>\n<p>Grab your notebook and continue reading to improve your success as an equities trader&#8230;<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/three-trading-psychology-tips\/#The_Setup_Result\" >The Setup &amp; Result<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/three-trading-psychology-tips\/#1_Get_Over_It\" >1)\u00a0Get Over It<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/three-trading-psychology-tips\/#2_Plan_Your_Trade_Trade_Your_Plan\" >2)\u00a0Plan Your Trade &amp; Trade Your Plan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/three-trading-psychology-tips\/#3_Remain_Objective_At_All_Times\" >3) Remain Objective At All Times<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/morpheustrading.com\/blog\/three-trading-psychology-tips\/#The_Big_Picture\" >The Big Picture<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"The_Setup_Result\"><\/span><strong>The Setup &amp; Result<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>On July 5,\u00a0we posted detailed analysis with <a href=\"https:\/\/www.morpheustrading.com\/blog\/short-qqq-buy-sqqq\/\" target=\"_blank\" rel=\"noopener\">5 reasons<\/a> we were monitoring NASDAQ 100 for potential short sale entry.<\/p>\n<p>Rather than selling short\u00a0$QQQ, the swing trade setup called for buying the inversely correlated and leveraged UltraPro Short QQQ ETF ($SQQQ), which moves higher when NASDAQ 100 moves lower.<\/p>\n<p>$SQQQ triggered our buy entry that same day, as\u00a0it moved above\u00a0the prior day&#8217;s high,\u00a0but the ETF reversed sharply lower and formed a bearish candlestick pattern on July 6.<\/p>\n<p>Just three\u00a0days after buying $SQQQ, the momentum swing trade hit our protective stop, knocking us out of the trade with a loss.<\/p>\n<p>The daily chart of $SQQQ below shows our July 5 buy entry and subsequent exit a few days later:<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/\/~rick\/\/charts\/2014\/160713SQQQ.png\" alt=\"$SQQQ TRADE \" title=\"\"><\/p>\n<p>As you can see, the trade obviously failed to\u00a0work out\u00a0as expected, but\u00a0there is <strong>plenty to learn from the trade,<\/strong> especially if you are a newer trader.<\/p>\n<p>Even if you are an experienced trader, you will find the following three points to be crucial\u00a0reminders to keep you on track from day to day.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"1_Get_Over_It\"><\/span><strong>1)\u00a0Get Over It<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In reviewing the $SQQQ trade, we still believe\u00a0there was certainly enough evidence to support the entry, but the trade moved in the wrong direction regardless.<\/p>\n<p>Although you\u00a0could pontificate for endless hours about\u00a0why the trade failed, doing so would be a waste of time\u00a0because the actual <em>reason\u00a0<\/em>the NASDAQ 100 (and $SQQQ) failed to follow-through as expected simply\u00a0<em>does not matter.<\/em><\/p>\n<p>What\u00a0<em>does<\/em> matter is understanding and truly accepting that <strong>losing trades are part of the business<\/strong><strong>,<\/strong> and you can not\u00a0have winning trades without losing ones (run <em>fast<\/em> from anyone who tells you otherwise).<\/p>\n<p>When losing on a trade, it is absolutely imperative to quickly lick your wounds and put the trade out of your head.<\/p>\n<p>Realize that a losing trade always puts you that much closer to the next big winner, so<strong> stay positive and focus<\/strong> on new trading opportunities in front of you.<\/p>\n<p>If you drive a car while staring in the rear view mirror, worried more\u00a0about what&#8217;s behind you than in front,\u00a0you will crash!<\/p>\n<h3><span class=\"ez-toc-section\" id=\"2_Plan_Your_Trade_Trade_Your_Plan\"><\/span><strong>2)\u00a0Plan Your Trade &amp; Trade Your Plan<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Our goal with each and every stock trade is to have a plan in place <em>prior<\/em> to the entry, and\u00a0stick to the plan while in the position (which we did with $SQQQ).<\/p>\n<p>As detailed in the blog post, our $SQQQ stop was\u00a0roughly 3% below support of the\u00a0July 1 low.<\/p>\n<p>On the morning of July 8, $SQQQ hit that stop and subscribers of\u00a0<a href=\"https:\/\/MorpheusTrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\">our trading newsletter<\/a>\u00a0already knew the plan with our preset trade parameters.<\/p>\n<p>This was a <strong>non-negotiable exit,<\/strong> especially since the trade was taken on the short side of the market.<\/p>\n<p>The key to making the math work for <a href=\"https:\/\/www.morpheustrading.com\/performance\" target=\"_blank\" rel=\"noopener\">consistent trading profits<\/a> over the long-term is to be disciplined with money management, specifically with regard to proper position sizing <em>and<\/em>\u00a0cutting losses quickly.<\/p>\n<p><strong>No single losing trade\u00a0should ever ruin your month<\/strong> or put your trading account under pressure.<\/p>\n<p>If it does, you are likely\u00a0trading too large of a position size\u00a0<em>or\u00a0<\/em>not honoring your protective stops.<\/p>\n<p>Just how much capital to risk per trade largely depends on your personal risk tolerance, but risking 0.5% to 1%\u00a0of account equity per trade (the amount lost if trade hits your stop) is a reasonable guideline\u00a0for an active trader\/investor.<\/p>\n<p>Cutting losses is every bit as important as proper position sizing. If you\u00a0can not cut a loss when a stop is hit, then it doesn&#8217;t even matter if proper share size was taken.<\/p>\n<p>For consistently profitable traders, <strong>cutting a loss should be easy<\/strong> most of the time (we say &#8220;most&#8221;\u00a0because\u00a0humans occasionally\u00a0make mistakes).<\/p>\n<p>On the other hand, traders with a faulty mindset may find cutting losses to be a challenge, especially if psychologically taking the losses personally.<\/p>\n<p>As the Wall Street adage goes, <em>it is OK to be wrong, but not OK to stay wrong.<\/em><\/p>\n<h3><span class=\"ez-toc-section\" id=\"3_Remain_Objective_At_All_Times\"><\/span><strong>3) Remain Objective At All Times<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<figure id=\"attachment_4558\" aria-describedby=\"caption-attachment-4558\" style=\"width: 300px\" class=\"wp-caption alignleft\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-4558\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2016\/07\/objective-mind-300x197.png\" alt=\"Clear your mind to remain objective\" width=\"300\" height=\"197\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2016\/07\/objective-mind-300x197.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2016\/07\/objective-mind-110x72.png 110w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><figcaption id=\"caption-attachment-4558\" class=\"wp-caption-text\">Clear your mind to remain objective<\/figcaption><\/figure>\n<p>Let&#8217;s face it.<\/p>\n<p>It&#8217;s easy to find yourself losing objectivity and becoming emotional over a trade, especially when overly convinced that a losing trade should have worked out for whatever reason.<\/p>\n<p>But <strong>emotional trading leads to subjectivity.<\/strong><\/p>\n<p>If left unchecked, being subjective about trading, rather than technically objective, can set you up for a vicious cycle of losing trades.<\/p>\n<p>For example, some\u00a0traders who sold short the NASDAQ through buying $SQQQ with us on July 5 may have exited the trade, but jumped back in and attempted to re-short the market this week without any valid reason.<\/p>\n<p>Having and following a<strong> trading system with a consistent process is crucial,<\/strong> as it will help prevent (not fully eliminate) emotional decision making.<\/p>\n<p>When you\u00a0truly understand that losing is a normal part of the business, you can clearly move on to the next trade and <strong>remain objective while following your plan<\/strong> for every new trade.<\/p>\n<p>This is exactly what we did by buying\u00a0<span class=\"__postbox-detected-content __postbox-detected-date\">$BABA in <strong><a href=\"https:\/\/www.morpheusTrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\"><em>The Wagner Daily<\/em><\/a><\/strong> on <span class=\"__postbox-detected-content __postbox-detected-date\">July 1<\/span>1<\/span>\u00a0(around $79.90).<\/p>\n<p>Our market timing model generated a new &#8220;buy&#8221; signal shortly after stopping out of $SQQQ, so we objectively\u00a0followed it.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_Big_Picture\"><\/span><strong>The Big Picture<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Putting this all in perspective, $SQQQ was merely <strong>one single trade out of a hundred or more<\/strong>\u00a0equity\u00a0trades we make every year (depending on market conditions).<\/p>\n<p>If you have\u00a0a proven trading system that works, and each new trade entry\u00a0is valid according to your system, then\u00a0<em>every<\/em> trade is good&#8230;regardless of the short-term outcome of any individual trade.<\/p>\n<p>As with\u00a0any discretionary system, some trades will be better than others (we are humans, not machines), but a winning system should produce positive results over several hundred trades, so <strong>don&#8217;t sweat the losing trades<\/strong> if you&#8217;re doing everything else right.<\/p>\n<p><em>To learn more about trading psychology, check out <a href=\"https:\/\/hubpages.com\/money\/stock-trading-psychology\" target=\"_blank\" rel=\"noopener\">The 4 Most Dangerous Emotions For Traders<\/a>. Also, please drop us a comment below to let us know what&#8217;s on your mind.<\/em><\/p>\n<div class=\"cfmonitor\" style=\"padding-top: 30px;\"><center><script src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\" async=\"\"><\/script><!-- Footer of content - Large --> <ins class=\"adsbygoogle\" style=\"display: inline-block; width: 336px; height: 280px;\" data-ad-client=\"ca-pub-7565144363001883\" data-ad-slot=\"6017996961\"><\/ins><script>\/\/ <![CDATA[\n(adsbygoogle = window.adsbygoogle || []).push({});\n\/\/ ]]><\/script><\/center><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Knowledge has to be improved, challenged, and increased constantly, or it vanishes.\u00a0&#8211;\u00a0Peter Drucker We couldn&#8217;t agree more, especially in the business of stock trading; the more you learn, the more you earn. As such, much\u00a0of the knowledge we share on this blog focuses\u00a0on recapping technical\u00a0chart patterns\u00a0of\u00a0past stock and ETF trades that led to successful, profitable [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-4553","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4553","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=4553"}],"version-history":[{"count":1,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4553\/revisions"}],"predecessor-version":[{"id":11256,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4553\/revisions\/11256"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=4553"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=4553"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=4553"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}