November 13, 2016
In our previous article we made two calls:
Buy the S&P 500 straight after the announcement. It will be heavily discounted.
Buy gold before the announcement to capture gains from a potential Trump presidency.
We profited from both according to plan.
Just like everyone else, we had no idea what the outcome would be. Our strategy was set up so that in both scenarios we would be able to profit.
However, we would be lying to you if we said that everything went smoothly.
As the night unfolded, we ended up doubting ourselves every five minutes. Should we exit now? What if the rally is going to stop? Should we double our position? Should we sell the S&P 500 now before buying tomorrow?
Being taken over by emotions is only human. The real skill is in retaining profits by managing emotions effectively.
The four things we could have done better:
Enter only when the trend has been confirmed.
One of the big mistakes we made was entering our gold trade too early because of a fear of missing out. Rather than having to anxiously wait for price to go in the right direction, we should have entered later at a point when higher highs were established on multiple timeframes.
Don’t buy straightaway. Always set orders to trigger in the future.
This allows you to take emotion out of the picture. You will only trigger a trade when the price reaches the level that you are willing to enter a trade at. The major benefit of this is that it prevents the unfortunate scenario of entering a trade when the price has peaked.
Increase the size of our position at each support level.
Whenever a rally presents itself, you want to make sure you make the most of it. It is tempting to buy more but only do so at the right points. This goes back to the first point of entering only when the trend has been confirmed. In the end we didn’t add to our position because we were overly anxious about increasing our exposure. Again, by taking emotion out of the picture, this need not be the case.
Don’t exit prematurely without a strategy.
Have you ever been in a situation like ours when you’re riding a rally but have no idea when to get out? Knowing when to exit is key. Rather than relying on anxiety of losing our well-earned profit, we should have followed basic principles of lower highs and lower lows on multiple timeframes to confirm that a downtrend was about to start.
Mastering these four points can go a long way. And we know that we will definitely be following these going forward. It’s not just about being right about a trade. It’s also about trading in a stress-free way.
Of course, there is a large number of indicators that you can use to inform your trading decisions but EmptyBucket is all about keeping it simple.
Inevitably, there will be times when you find yourself in a losing trade. Emotions will run wild in these cases and you’ll want to know how to keep your cool and survive another day. In a future article, we will go into more detail around what to do when everything goes south.
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