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Market lesson: When you miss a trade, just let it go

Davis MartinDavis Martin ·

What happened: In the aftermath of Hurricane Harvey, I was one of many traders who expected homebuilders, such as Lowe’s Companies Inc. (LOW) to run to higher prices. It did, but  I just whiffed on the most attractive part of the trade, which took place Sept. 6, as the stock closed with a pretty hammer candle, the type of trade everyone wishes they were in. Lowe’s was up nearly 5 percent for the week ended Sept. 6.

It’s always frustrating to miss out on a trade, particularly if you’ve been watching the trades, charts, and market conditions just waiting for an entry point. But face it, stuff happens; things (like other trades) come up, catch your attention, and sometimes the trade just slides past, even though the stock has been on both your mind and your watch list for days, while you’ve been sizing up the right trading vehicle (shares or options?), gauging potential profits and calculating stop-losses.

You can’t be ready to trade 24/7, no matter how tempting it might be. You’re going to miss trades sometimes, which raises a question savvy traders have to answer.

Now what? Initially, I put Lowe’s on the watch list as a fundamental play, trading off of the 50-day simple moving average line of $75.81 (meaning a break below that would be the stop-loss), and looked for entry points all day; by the end of the day the stock was trading $2/share higher.

I missed the whole move. While disappointed that I couldn’t catch an entry, I’m looking for the next trade idea, set up, and potentially profitable opportunity rather than being upset with myself for missing this one.

The moral of the story: If you buy stocks based on FOMO – the fear of missing out – you’ll regret it every time. So if you miss a trade, don’t force the issue, simply move on. Maybe the next hurricane – Irma, set for landfall this weekend – will create the next opportunity in LOW and if it does, I’ll be watching. But what I would be the next trade, not one that almost got away; stay focused on what’s next, rather than what you missed.

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Davis Martin is the head trader at Dailyprofitmachine.com. He trades SPY calls and puts and swing trades individual stocks and stock options. At the time this commentary was published on RagingBull.com, he had no shares, options or open orders in LOW and had never traded the stock before.

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