Missing trades manifests in numerous ways. Multiple causes lead to missed trades. Once past this hurdle, we can begin to increase profits and the efficacy of our trading.
Why are you missing trades?
The first step to solving our problems is to recognise the reasons behind them. Our first port of call is to assess the reasons behind missing trades.
No clear trading strategy or rules
Getting this out of the way first and foremost – how can you judge something as a missed trade, if you don’t have concrete rules in place? Your strategy must be solidified and set in stone before you start judging yourself for missing trades. If you don’t have rules in place or don’t know what your trade setup looks like, you’re lying to yourself and possibly making the issue worse. Being harsh to yourself for a missed trade, even though it doesn’t fit in with your rules anyway, is fruitless and damaging.
No confidence in your trading strategy
This is another excuse which some people have for missing trades. This goes back to asking yourself why you weren’t confident. If you have stats and a clear plan then you can gain confidence over time. Nonetheless this can be a very real reason for missing trades. You simply need to ask yourself why your confidence was low before pulling the trigger. Finding the root cause will be valuable.
Similar to lacking confidence, fear before taking a trade can cause trades to be missed altogether. Fear is arguably a stronger emotion than lacking confidence and one which needs to be stopped. Fear before executing can incredibly detrimental to your edge.
Putting too much pressure on this single trade
You’ve had a couple of losers and recency bias is starting to creep in – ‘is my edge disappearing?’ you ask yourself. Of course it isn’t. Don’t let your two losing trades yesterday effect your decision making process. This can cause you to be in a mindset where you need a winner and execute poorly, second guessing yourself at every turn. This will ultimately lead you down a bad path.
‘I just didn’t see it’
How many of us have said that before? Just after the trade goes to the would-be target you see it as clear as day. This is why you need to have a rigorous process. Once you have a rigorous process and routine in place, ‘not seeing’ trades in real time should become a thing of the past. Just browsing charts when you feel like it can result in missed opportunities.
Busy doing something else
Life gets in the way at times. This is a reason for missing trades which is difficult to avoid. If you suddenly need to leave your desk for reasons beyond your control, there isn’t much you can do about it.
Impact of missing trades
Now that we know some of the reasons why trades are missed, let’s have a look at how this can impact you and your trading.
You didn’t journal the trade
A trade you haven’t taken (for whichever reason) is probably not going to be in your journal or trading statistics. It probably should be. If a trade setup has occurred which fits your edge, it has to be written down with the others. This is where many people can fall over. Your sample is lacking key data points due to human error and it needs to be eradicated.
This is something that Edgewonk does very well, they give you the ability to journal trades that you’ve missed. Be very careful with this however. Make sure to journal trades you have missed which were losers too. If you only journal missed winners then you are lying to yourself and tainting your dataset. ‘I would be rich if I took all of these winners I missed’. Get that out of your head and track all trades which you haven’t taken.
Live results differ from backtesting
As a result of not journalling the trades, your live results are underperforming compared to what you expected to happen. By missing trades which conform to your trading edge your live results are a complete mismatch. Your expectation in testing was 0.4 but trading live has only yielded 0.2. The ramifications of this could be a lack of confidence in your strategy and inability to execute effectively moving forward.
Your trading psychology has been damaged
Having missed trades, you’re now kicking yourself. ‘I’ve gotta make up for that now’. You take a subpar trade in order to increase your bottom line. It’s a loser. This is the start of a slippery slope of revenge trading and overall poor execution. Let it go, make sure it doesn’t happen again, don’t try to ‘trade your way out of’ mistakes, just rectify them moving forward.
How to minimise missing trades
Now that we have assessed some of the reasons for missing trades and what their impact can be, let’s have a look at some of the ways we can avoid it altogether.
Journalling trades for better understanding of your edge
We have touched on this already but if it’s a lack of pulling the trigger, a journal will be your best friend. Having numerous data points of the exact same setup and concrete proof of edge will do wonders for your execution. Having a digest of all of the times the trade setup has occurred will give you quantitative and qualitative back-up when making trading decisions. Keeping a ‘playbook‘ of the trade setups can help immensely so that you know exactly what you want to see.
Set trade alerts
This one is quite self explanatory. Once you have mapped out markets and are aware of the areas where you want to execute, set a price alert. This way you’ll be notified when price is where you want it to be, and have no excuse for missing it. As this doesn’t come as default on MT4, I have attached an indicator for price alerts:
Have a solidified and rigorous trading plan
This does not just mean that you know what your trade setup looks like. This is should include absolutely everything about your trading. This is a great free trading journal template to get you started. Your whole routine must be in this plan, and that includes your process for scanning markets and finding trades. Get that routine right and you should find that less trade setups are slipping through your fingers.
Only take your best setups
If your reason behind missing trades is in the fear or confidence category, something needs to be done. Why are you fearful or lacking confidence. If its because you are trading with high reward-to-risk and your win rate is too low, fix it. Perhaps only take your setup with the highest win rate. This was you can avoid longer and steeper drawdowns and gain confidence more easily,
Realise that it’s ok to have losing trades
This is a corollary to the last point. If you have fear of losing and lack confidence due to this, you need to remind yourself that it’s fine to have losing trades. It’s unavoidable for all traders. What isn’t fine is making poor decisions based on your emotions.
Get comfortable being uncomfortable
Something that Nicola Duke touched on in her episode of Chat With Traders, it’s natural to feel uncomfortable when there is money on the line. However, you need to be ok with this and get comfortable being uncomfortable. This is a very important aspect of trading. The feeling of discomfort may never go away but you must come to terms with it.
See if you can apply some of these tips and increase profits in your trading. Make it a goal to not say ‘I wish I took that trade’ or ‘why did I miss that trade’. I hope you found this article helpful, subscribe for more new and exclusive content!