We have all been stopped out and then flip (reverse) our position only to get stopped out again. Two things help me. One I need to separate myself immediately. If I am not at my screens I can’t trade. No one likes to get stopped out and that most certainly changes the way I view the market in that moment. Get up and come back even if it is for 15 seconds.
After sitting back down, I begin to evaluate the market again. Flipping my position has worked sometimes and sometimes not. I have a higher win rate in flipping by thinking about it in terms of my thesis changing. A trade does not work because it was a bad price (patience/news driven/fat finger, etc) or a bad thesis.
If I flip because of a bad price I will almost always fail. If I flip because my thesis changes than I have a much better chance at success. The first thing I look to when I get stopped out is to see about news. Knowing when releases happen will help. I then make sure I saw all of the variables, it does not happen often that I miss something but it does happen.
If those two things didn’t happen it means my thesis was wrong. At that point, I will start to look at the opposite thesis. From their I will make a judgement on where that potential of the trade is and where it is in relationship to current price. Very important. I can evaluate this pretty quickly because I make it a habit to see both sides of the trade at all times. In tighter ranges, I am much less likely to reverse a position because there isn’t as much room. That is the time when opportunity cost is the most expensive. A risk that all traders must accept in a tight range.
What do you in those situations? What worked, what didn’t?
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