Missed Orders

Because the profit objective, projected daily range, holding time, and end-of-day constraints all put limits on a day trade, there are situations in which the market jumps after a news release and you cannot get filled anywhere close to your intended price. With most of the potential profit gone before you enter the order, it would not be surprising to simply skip that trade. These missed orders, called unables, can add up to a large part of your profits; at the same time they never reduce your losses.
Some markets are prone to more unables. For the energy complex, heated military or political activity in the Mid-East can cause a prolonged period of very erratic price movement, resulting in as much as 20% unexecuted trades during a 1-month period. If we consider the normal profile of a short-term trading system as having an average net profit of $250, an average loss of $150, and a 50% frequency of profits, we expect a profit of 85.000 for every 100 trades and a reasonable profit-to-loss ratio of 1.66. If, however, there are 10% unables, that missed opportunity must come from the profits; if the market was moving in the opposite way, you would get all of your positions filled. Then 10% of the profitable trades means 5 trades out of every 100 for a total of $1,250 missed. This reduces the total profits to $4,750 and the profit factor to 1.50. It may turn a marginal trading strategy. or one with small profits per trade, from a profit to a loss.