Traders will always be the first to admit that taking a stop out is
difficult in the early days, this is due to the feeling of being wrong
and the fear of losing. With that the fact that the trader just lost
a little bit of your money as well and it can be tough to take. You
will realize that losing small is a vital part of the game and no one
has winning trades all the time. If you don't have small losses, you
can never have larger wins.
Sure, sometimes you will take a stop out, only to watch the trade go your
way, but you also have to ask yourself the question: What if it had
continued to go against me and I wasn't protected? How long do you
think the accounts lasted of those people out there who bought
previous lows of say the EUR/USD and didn't protect themselves? Many
people bought those lows, but only the professional traders who got
out when they were wrong are still around right now. Take the stop and
the loss and move on to another trade. Things won't always go your way
in the markets, so learning to stop out is part of the trading game.
Learn to take a Profit remember "pigs get
slaughtered"
Traders and people only trade to make profits, hitting a trading
target and closing the trade can be one of the single most challenging
tasks a market investor can take on. We always hear about the emotions
of fear and greed driving the markets and never is this more the case
than when an individual is in a good strong trade and then sees it
fall all the way back for a break even or small loss.
Sometimes this will happen and I have personally had numerous trades fall
short of their targets. As frustrating as this can be at times, I have
also had plenty of trades that have hit their target perfectly and
closed out for a great profit. All we can do is stick to our plan of
action and don't let our feelings get in the way.
The key aspect of this rule is really to get into the habit
of placing the target order in the system based on your objective
analysis before you take the trade, and if it hits the target, then be
happy for the result. So many times I have seen students get greedy
and keep extending their targets well beyond their original only to
witness a violent reversal and big profits left on the table. Remember
that we are trying to achieve consistency in our trading, and over
time, if you have been thorough in your plans, then you will have
detailed performance stats to work on and amend your rules with in the
future.
Learn to take the Trade
Traders need to learn to take all of the trades which meet
your trading plan. Essentially, this could be one of the most
overlooked aspects of consistently successful trading and cost you
profits. What most new traders make the mistake of doing is attempting
to look at too many markets and then try to cherry pick the best
trades across the bunch. There is absolutely nothing wrong with
looking for trades with the best probabilities going for them, but we
also have to be very cautious about missing out on trades which met
the trading plan and were not taken.
You end up picking the losers and not taking the winners this happens all
the time. A simple solution for this outcome is to just divide your
maximum risk across the board and get involved with all the markets
you are looking at, or simply, look at less trades.
We can also have concerns when faced with a losing streak in your
trading. The very worst thing a trader can do is pass on a trade which
matches their trade plan because they fear another loss. This can
often result in passing on a quality setup which could have greatly
turned the overall profit and loss situation around and impact the
final results and consistency. If a trade comes up which meets the
success for the plan, then it must be taken; so hit the buy button.
Remember that you have to be in it to win it and make money. Passing
on a trade opportunity due to emotional setbacks is not going to make
you money.
What is needed to do this is the ability to know the difference
between key levels where support and resistance are out of balance and
other levels where supply and demand are not out of balance. The
important message and lesson here is that you don't need to have big,
wide stops on larger time frame trading opportunities. By going down
to smaller time frames and looking inside larger time frame levels on
your charts, you can drastically reduce your risk and increase your
profits.
Traders looking for quality buy and sell levels and market
timing on a chart, it is easier to show these areas on the larger
time frames. It's not that larger time frame trading opportunities
work better on one time frame or another, it's simply that identifying
key levels on a larger time frame chart is easier for most traders.
However, with a supply or demand level on a larger time frame chart
often comes a wide protective stop which means big risk or small
position size.
While you can and should use larger time frame levels to find and take
advantage of trading opportunities, you certainly don't need to add
risk or decrease position size.
By learning the market basics through experience, you will be able to
invest or trade in the stock market that is a lot more forgiving than
the Futures, Options or Forex markets.
When you have sharpened your trading skills in the stock
market through swing trades, you will be a much better trader when you
go to a different type of trading. There are bigger profit potentials
with swing trades than day trades. As a swing trader, you can place
your trades and leave your screen and make sure to set your stops and
take profit. This will allow your trading account to work for you and
not the other way around.
Once you leave your trading screen, you are also removing the weakest link
in your trading, your emotions. This alone should help most traders
tremendously. When you day trade, you are forced to sit at the screen
and can very easily get emotionally involved with your trades and
stray from your trading plan. Keep it simple and your trading will
make you more money in the long run. |
