Winning lesson from a losing trade

I just wrapped up a losing trade in one of my accounts.

It’s actually kind of a big deal because my trading system doesn’t get very many losers — by design.

So how did this happen?

I ignored some of my key guidelines when opening the trade and suffered the consequences.

In this case, I have some floors I put in place on the price of a stock that I like to enter. I do that because I’ve seen that stocks below this floor tend to be more volatile than ones above it.

The annoying part is that I’ve already learned this lesson through previous losing trades.

Last year I found myself stuck in a nasty trade on Weight Watchers (WW) which was well below my floor.

The caveat there is that WW was an experiment — a test that helped me prove out why I have a floor.

Yet here I am again dealing with a losing trade and having to learn this lesson.

I wouldn’t feel as bad if it was just a trade that didn’t work.

While it’s rare for that to happen, that scenario is baked into my trading plan.

I expect to deal with an occasional loser that falls apart for a strange, irrational reason. In fact, I’m currently dealing with one now that’s slowly coming back to life after it had a massive drop after reporting good news!

Crazy.

Anyway, the best thing for me to do is learn from this so it doesn’t happen again.

That’s almost always the best thing to do from failure. Learn from my mistake and set up parameters in place so that doesn’t happen again.

I’ve already got the guidelines in place.

I just need to follow them.

So, I can take this painful loss as a reminder of what happens when I ignore my rules and decide, “eh, it’ll be fine.”

It was not fine. In fact, it stinks.

Fortunately, I can make up the loss in a week or two of trading.

Obviously not ideal, but it’s a small price to pay for cleaning up the psychology of staring at a loser day in and day out.

Yes, that’s right, sometimes it’s more valuable to pay the price just to get rid of a loser so you can refresh your mind and be ready to make better trades going forward. I occasionally have to do that. Like I did today.

I know it’s probably bad form to share the losses with you.

But, I don’t care about looking good ... I want to be real.

Besides, all traders make mistakes. And even the best systems dont’ work 100% of the time.

Although my trading system comes pretty close.

After all, that tiny loser ratio is the main reason I use the system in the first place.

Well, that and it brings in some good profits over the long-term.

If you want a 30-minute sample of my system, start by subscribing here:

— Ricky Ketchum