Archive for September, 2006
Stop It!
September 6, 2006 at 9:56 am
We all know what happens after the stop!
I used to think that the most successful traders just knew how to locate the big winning trades and that was the key to their profitability.
Not anymore – I’m past that, and thankful that I finally realized it. It took some time, probably because of the irony of it all. Who would have thought that the best traders’ real key to consistent profits in the market all boils down to humility and their ability to get out of trades when they need to the most? What happened to bravado and having the guts to take the plunge and go big when you really feel you’re right? Is that not how the best traders do it?
Occasionally that approach might give you a windfall profit, but what happens when you’re wrong (and you WILL be)? If you don’t have an exit plan, you’re gonna be toast. It’ll be Hammer Time for your account, and it won’t be pretty or fun!
If you don’t respect the market, it will force you to respect it.
I’m a huge advocate of using stop loss orders, regardless of your operating timeframe. There are plenty of reasons to sell your stock, but the most basic premise is that once your trade stops behaving as you expected, it’s time to consider kicking it out the door.
