Whipsawed in a trade

I want to provide an example of a trade that was a losing trade, even though all of the trader actions were correct. More importantly, we need to look at the mental states involved, and what could have happened. This morning, there was a breakout setup in soybean futures. Being able to be at the screens at the open (9:30 am CT), I went long as soon as price went above the last high (the overnight session), and had my stop in place. Price then reversed against my position. Here is where new traders can freeze, thinking that the trade will come back and go their way. If a b/o reverses, you have to get out.

Fortunately, I closed the long position, and went short. Experience has shown that a failed breakout can yield a good trade as price goes against the trapped longs. In this case, price reversed again, and went well above my short entry. At that point, I had no business being in the trade, and covered the short.

As you can see above, the 5 minute bar at the open created a crazy candle. The lesson here is- this stuff happens, and the key is that as long as you know that you trade a system that has a positive expectancy, you have to take all signals, both long and short. There will be losing trades now and then, but we are trading on probabilities, not absolutes.