An interesting bad habit that happens to the best of us is called:
We see an amazing trade forming. We have all our green lights in place, put in our order to get filled at the right price action, and we don’t get filled on the trade.
It can even hit our order waiting but never actually get filled to be fully in the trade.
IMPORTANT – we never ever enter at market price. It causes us to immediately lose money. All our trades will be put in deliberately and we always have the price we want to be entered at. We are always in control of it.
So we see the bars hit our order that is waiting, doesn’t fill it (which happens very often) and then we see it go exactly in the direction we want it to go.
This is SUPER FRUSTRATING. Especially if the last trade that you took failed. Or if you’ve been sitting and waiting for a good trade for some time.
This is when our emotional state takes over and we gun it and
we chase it when we see it not fill us and start moving strongly in the right direction.
Now that we chased it, we didn’t enter it on our green light entry. So that means our original target from where we originally wanted to enter, in our minds, has shifted with the new – badly taken trade.
So with a chased trade we are already completely not following our directions. Then we get angry at ourselves for chasing it and don’t want to make it a waste of a trade. So we wait for the full target amount (which is now different from where we were supposed to enter) and it doesn’t go there because it hit the original target which we didn’t want to take. And now we see the chased trade retrace much further back down and stop us out.
And what most traders do as well in this emotional frenzy, is they start to lie to themselves saying that if they entered where they were supposed to, their stop loss (risk management) would be much further than the one they have now. So instead of losing their normal risk management amount, they have added on even more of a loss.
And now we are sitting on a loss (a big one not only financially but mentally and emotionally because we didn’t stick to our plan). All because our emotions took hold of us.
It will most likely happen to you. However, knowing this now, you will do it maybe once or twice and realize what you are doing. And then you will, with time, learn to control your emotions and understand that there is always another great trade coming.
And that the past trades (if they were losses) are now part of the past. Chasing a trade doesn’t repair that and most likely makes it worse because you repeated a loss.
And if you’ve been waiting for a good trade for a long time, think of it as a learning process. You got to watch what the market is doing. You get to applaud yourself and pat yourself on the back for this trade that you spotted which turned into a perfect movement, granted you weren’t filled.
Yet you saw it and that is wonderful because becoming aware of valid, compelling trades and setting up for them is a huge win in the process.