Broken Trades

A memorable Far Side cartoon is called Horse Hospitals. In the picture, a pair of racehorses lie flat on gurneys with broken legs hoisted. A veterinarian rounds the corner staring at a clipboard in one arm while holding a rifle in the other. The adjacent room shows another gun-wielding vet with a large caption reading “BLAM” while eyes widen on the injured racehorses, suspecting their time is drawing near.

Those poor racehorses! If they only knew that a broken limb would seal their fate, they’d undoubtedly run with much more caution!

Now I’m no advocate of cruelty to animals, but my stocks are a completely different story. I have no love for them if they do not work, and I certainly know when something is broken (remember, my P&L tells me!).

If you think of your trades as horses in the race and one of them pulls up lame, it’s time to turn out the lights for that trade. If that trade was your employee and not doing its job, wouldn’t that be grounds for dismissal?

Let it go if it isn’t going to work for you. Staying in beyond your planned stop level exposes you to unnecessary risk with far-diminished odds of a reward, leaving your capital tied up in an underperforming trade.

Good trading requires a cold approach. Building and implementing a game plan is followed by reviewing results so that any adjustments can be made. If you want to trade successfully, make a commitment to operate in such a manner. It might not be an overnight process, but it’s one which will be well worth it to you in the long haul.

Btw, even the vet in the cartoon doesn’t bring his feelings into play…he’s staring at his ‘chart‘ before making a decision. 😉

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com