What To Do About Missed Trades
By Dave Mabe
One of the most frustrating things about trading is missing winning trades.
When you look at your backtest's equity curve, the reason it goes up and to the right is because it's capturing big winners.
Even a great strategy with what appears to be plenty of cushion for slippage can evaporate quickly if you consistently miss big winning trades.
The more concentrated the big winners are relative to the total profit, the more this will be the case.
As I mentioned on the Bionic Trader webinar at SMB Capital on Tuesday, you're guaranteed to get all the losing trades with most strategies.
As frustrating as missed trades are, they're also very motivating.
Because there's almost always something you can do to make sure you capture them in the future.
The first step to addressing this is figuring out when they happen.
If you're not running your backtest each day and comparing it to your live trades, you're flying blind.
You're probably missing trades and aren't even aware of it.
Comparing live trading to your backtest should be done regularly - preferably daily!
It's far easier to track down missed trades on the day they occur, versus trying to piece together what happened in a trade weeks ago.
Here are the common reasons you might miss profitable trades:
Your order was entered too late to get filled
Your order was too aggressively priced
Your strategy goes short, and the stock was hard to borrow (HTB)
Your real-time trading process differs from your backtest
You're trading the strategy manually, and you made a mistake in placing the order (there are dozens of ways to do this, and I've done every one)
Look at the list - 90% of the problems identified are solved by automating your trading.
Are you still "click trading" - why?
-Dave
P.S. Are you missing profitable trades because you're too slow? Imagine your orders entering instantly without errors. Eliminate your trading mistakes with MabeKit.