Do not try to take revenge
Why do you have to get even with the market on this one stock? No one but you cares that you lost money. Trying to recoup in the one stock that sank you is not a strategy. It’s an emotional attempt at revenge that is doomed to fail. You can’t get revenge on the market. You can only do the right thing, the right way. Trade for today, without regret, without wishful thinking, without anger. Trade by following a system.
William Eckhardt, the great trend-following trader, has spoken forcefully about the idea of not having a memory in your trading: “Suppose two traders, A and B, are alike in most respects except the amount of money they have. Suppose A has 10 per cent less money but he initiates a trade first. He gets in earlier than B does. By the time B puts the trade on, the two traders have exactly the same equity. The best course of action has to be the same for both of these traders now. Mind you, these traders have very different entry prices. What this means is that once an initiation is made, it does not matter at all for subsequent decisions what the entry price was. It does not matter. Once you have made an initiation, what your initiation price was has no relevance. The trader must literally trade as though he doesn’t know what his initiation price is.”
Another way that traders may be tempted to take revenge is by increasing the position size of the market they are trading, especially after generating a string of losers. Perhaps soybeans had four losers in a row and you decided to double your position size on the fifth trade. After all the market has to give a winning signal now, right? Wrong. Each trade you take at double position size shortens the life of your trading career!
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