Don’t Let Perfect Ruin Good

Perfection and trading don’t mix. There is no perfection in trading. Perfect entries, perfect exits and perfect setups may exist, but that shouldn't be your goal. Your ability to perform as a trader can be directly linked to just how imperfect your entries and exits are. The trader waiting on the perfect entry may never get the chance to take an exit. This week one of my students was waiting on the perfect entry and missed a good trade. I took the trade and was paid promptly after entry. When I asked him why he failed to take the entry his first words were “I thought” it would go lower. The trade level we had identified as a high probability entry was fading the selling. I went long when the parameters of the setup were met. He hesitated because he thought he would have to take some adverse price action against him and figured he could wait for a better price. What happened was price bounced hard and in minutes I had my first scale off and was in a great spot with my remaining position. He missed it. He missed out. He wanted perfect and he let it ruin good..actually great, I caught the low of the day. He then asked why I had the confidence to just take the trade? My answer was it isn’t about this one trade. It’s about the many more to come after it. I wasn’t thinking about this trade as more important than any other, it’s just one of the many in the strategy I will take. My job is to execute the strategy, not pick and choose which setups feel good or match my bias. I know and have confidence that the strategy will perform extremely well over time so just execute and then manage. My student wanted to take a bit less pain thus missed out on all the joy trying to avoid some pain. I get it I do. The market has been trading in big swings with volatility. Selling has persisted further than most expected. So fading the selling was uncomfortable. He wanted some comfort that he wasn’t going to take some pain. I executed because I planned on pain, I didn’t try to avoid it. Below is from a blog post earlier this month.

- Only scale in high volatility, always full size in normal volatility. I need to get paid on the RISK I am taking. Execute strategy no bailing out. I have done the work allow it to pay.

- Losses are just a cost of doing business. No perfection in this game. Stick to strategy! There is no room for revenge trading or marginal executions.

- Respect Stops — enough said.

  • Plan for Variance — entries won’t be perfect so allow for this in strategy.

Plan for variance. My entries won’t be perfect. Make this part of the strategy. I did this. My student failed to do this. In high volatility, the probability of the “perfect” entry is greatly diminished. It’s about planning for pain after entry so that it’s accepted pain. It is just part of the trade. I entered knowing this. I planned for this. I executed the strategy and didn’t bail out due to it being in an uncomfortable spot. I have done my work, I know my edge and I can be confident when others may be uncomfortable. This is where my student still has some work to do. He knows the strategy, he actually is even confident in the strategy but he needs to step up and execute. When you can find comfort in entries where others find discomfort you are probably finding edge.

A trader I follow, Jon Boorman on twitter, he has written about this. We trade different time frames and strategies yet we both take our setups. Even the setups that feel uncomfortable. We both have confidence in spots that others don’t, in this way we are similar. Jon has a few great podcasts out there and has written often about his trading. Do yourself a favor and take a read and listen. I personally listen and read anything he does.

Don’t let perfect ruin good in your trading.