“You are the architect of your own life” ~ Henry Thomas Hamblin
Episode 1 is available here.
How many times have you nailed the perfect trade entry, getting lured into excessive confidence, to finally see your position turned massively red?
Soldato is one of the best scalpers I follow on Twitter. Each of his posts makes me questions my approach to the market and he made me grow a lot in the last few months.
Like many, I used to struggle with my entries, and I worked really hard to have cleaner entries. Did that make me a better trader? Hell yeah! Did that turn me into a systematic winning trader crushing the market day after day? Hell no!
I tend to neglect the most important part of the trade: the exit.
Let’s dive into a concrete example from Friday’s action on $NQ.
Support zone identified in pink;
Bear trap with a nasty wick;
Entry on the second green candle;
Looks great, right? There’s a third bull candle in a row. We’re now well in profit. But where’s our exit?
TP1 - High of current consolidation range;
TP2 - VWAP
TP3 - Previously lost support
As your unrealized profits increase, you get euphoric and start to increase your TP without any tangible evidence that you should be doing so. To me, it’s just another form of Fear Of Missing Out (FOMO).
You’re already in a trade, in profit, but you want more. Because you’re a greedy trader.
The reality is, your original TP1 was a great area to exit, but it was “not enough”. The reality is, prices dropped by almost 200 points and your SL has been hit, even though you were sitting with 50 unrealized points. And it all happened so QUICKLY.
Maybe there are no wrong answers. For my trading style, I know TP1 is the correct answer, and I need to stick to it. Rinse and repeat.
The key takeaways for me are:
Great entries need to be protected using breakeven stops;
Not put you in a “FOMO” situation. Respect your original plan;
Exits are more important than entries. You can have the best entries in the world but still, be a losing trader.
There are many examples like this every day. Study your charts, look at your past trades. Could you have done better? Do you have a systematic approach for your exits?
These are some of the questions you might want to ask yourself.
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