Missed Trading Opportunities

As much as we talk about trade logs, there’s one thing that’s rarely taken care of to the degree it should be. As I discussed in 3 Tips to Improve Trading Performance Now one extremely useful way to improve your trading performance is to track your errors on the trades you take. But all too often, what isn’t tracked is how much missed trading opportunities cost us.

Alternate Reality

Missed trading opportunities can create a big performance discrepancy between back-tested and actual trading results – and this can be a really big problem, particularly for discretionary traders. We all know this. We see trades that we miss through either lack of focus, distractions or work commitments. But just like with trading errors, it’s much harder to really get to grips with the problem of missing trades unless you’re tracking them on a day to day basis.

It’s really important to make sure you track them on a daily basis. If you don’t, it’s much harder to figure out exactly why you missed a particular opportunity. Is it because you’re tired and unfocused? Is it that you’ve been distracted by a big move in a different product? Or perhaps you tend to stop trading too easily when you’ve already made money for the day, in an attempt to preserve profits. Whatever it is, taking accurate notes at the time of the missed trading opportunities is going to help you pinpoint any recurring themes.

Mind Games

Another really important reason you’ll want to minimize the number of missed trading opportunities is a psychological one. In Why Pros Don’t Chase Trades I touch on the fact that when you miss a trade, it’s easy to be sucked into chasing the market. The fear of missing out can create strong trading urges and put you in situations where you’re taking what you would recognize in the cold light of day, as poor trades. Of course, there are always chances that realistically we can’t take advantage of – but those that we miss when we shouldn’t have are the ones that can trigger emotion-based trading.

A Big Motivator

Clearly money is a big motivator in trading. Losing money or missing out on money tends to be easily forgotten if you don’t have strong performance tracking and review routines in place. Part of this could be down to the ambiguous nature of some discretionary trading methods and part of it is because memories where strong emotions are involved, tend to get blurred. However, by pinpointing exactly what you’re doing that’s holding your trading performance back, there’s a huge incentive to lean on your findings rather than your trading urges. It sears reality into your mind so it’s hard to forget.

Missed Trading Opportunities

By remaining disciplined enough to track these missed trading opportunities on a daily basis and shrewd enough to identify exactly why this happens, you’ll be adding a new dimension to your trader performance analysis. Once you understand how to take the trades that the market offers you on a more consistent basis, you’ll elevate your performance to the next level.

Trade well.

For more updates from Mark and the team at NetPicks, be sure to visit their trading tips blog at NetPicks.com.