You know the difference between winning and losing trades — we’ve all experienced both and know the joy and the pain well.
However in considering the loss of a trade, the strategy is usually sound, it is the trader that came up short.
Uh huh… that is most likely you! However, help is on the way…. I am going to discuss ways to stop financial losses, and begin being a winner at the trades. Prior to placing orders, you have to decide where your stop loss order will be placed.
You can’t delve into the topic of position entry thoroughly without speaking of stops. The question is, “Why are stop losses used by so few investors?” If not using stops is a weakness for you then you want this info. This info could mean the difference between on time retirement with a fat nest egg or just ‘getting by’ at a later retirement date.
Plan and place stops equals your plan to win, and you are prepared to have a loss but make it through to continue trading. A look at the traders psychology of loss taking is in order here.
Every pro trader has to have a point in their minds denoting when they will get out, before they will get in. This has to be known before hand so that when the moment comes they can get out quick. This is a down-home basic knowledge the each pro-trader has to have.
What are the answers to these questions?
1.) How do you know if you should sit tight or cut your losses?
2.) When a stock is losing, do you have a guide that lets you know when to sell?
3.) Is there a set point for you to break-even by moving your stop?
Are you unable to answer these questions? You aren’t alone. This indicated that you should be establishing some rules, especially when going to short stocks, but trading rules don’t mean a thing if they aren’t used. This is why we need to have a frank discussion about why you aren’t managing your risks in a hands on way, like a pro should.
Refusal by an investor, to take a loss falls under two headings:
1. Inability to admit they are wrong.
For many traders a realized loss is a huge admittance of being wrong and that is just too hurtful to acknowledge. To them it is linked to being a failure at life and their self image is directly affected by this perceived failure.
The loss is personalized and pulls on their emotions. It is easier to deny the loss than own up to the pain of the loss. He will either lose everything before he will seek to change or he will quit trading.
2. Taking that large of a hit would damage their portfolio greater than it can recover from.
But in reality, there’s no such thing as just a paper loss. The stock (bond, option) is worth what it’s quoted and the loss exists whether you realize it or not.
These 2 situations are types of self-denial this problem is common with tons and tons of investors. Observe Merrill-Lynch, AIG, WAMU, Lehman.. and on and on…. you should be comforted to know that this self denial is not limited to just one income level or social status.
Are you squirming in your seat because as you read this article you feel powerless and/or angry? That is a good thing. It tells you that you are ready to make the change.
The winning trader uses a different strategy from the losing trader by regarding the pain from the loss in an impersonal way. They use the loss as a sign that something went wrong with their approach, or their execution, but NOT that something is wrong with them.
A winning trader distinguishes himself from what he does. They are aware that their worth as a human being is not linked to their skill at trading, but that they will need to increase their skill and experience to improve their approach and execution. They use the pain they feel to motivate themselves and increase their drive to be a better trader.
These are responses you learn and you can control them. Losses bring pain AND the possibility for growth. It is all in what action we take after the pain comes that is most important, not the actual losses.
Stick with my proven ETF Trend Trading system and make winning a habit. Study; ask questions and monitor your position size relative to your portfolio and you will end up on the winning side more often than not.
The continued reminders about “proper stops and risks” is one of the main points in the 1 year mentorship program. When you have a full understanding of my system, it will be important for you to hear me say “Don’t move your stop” and “Take your profits at the time the system says to not before or not after”. The course itself is top notch, but the mentorship is valued more highly among the majority of my students.
Learn how it’s very possible to make 6% per month in your investment accounts using etf trend trading! “Big A” is a recognized expert in the world of etf trend trading system & reveals trading & investment secrets that have been kept under wraps by hedge traders for years. Get his free report & webinar today!
Loading ...
