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Increase Your Trading Profits And Reduce Your Losses
Are You Interested In Increased Profits? Then Go After Decreased Losses!
Allow me to share 4 RULES for trading which directly deals with losses and if followed, can 'plug' many of your profit leaks!
RULE 1. Wait for the stock to CONFIRM the anticipated direction before entering the trade.
This rule can decrease the NUMBER of losses you encounter. As simple as that sounds, it is one of the most frequently violated principles of very good trading habits. So often is this rule broken that we are all familiar with cute little descriptions such as "catching a falling piano", or "reaching for a falling knife."
What you use for this confirmation is your own decision; price rise or fall, momentum, frequency of trades or bid / ask "size" are simply just a couple of options. Personally I combine them all (more or less), developing a 'feeling' about the confirmation, rather than a measurable quantity.
However you choose to define confirmation, let experience be your most effective teacher here. Do not enter the trade until you are absolutely convinced the stock is shifting your direction!
RULE 2. Whenever you are filled on the entry, place a STOP loss to minimize your potential for loss.
This rule controls the Amount you can lose on any one trade. I like to use about half of the stocks daily movement for my stop loss amount. As an example, if a stock price moves on average, say one dollar each trading day, then I'll back off 1/2 of that, or 50 cents and place my stop loss there. This limits the losses possibly incurred on that trade.
Whatever you decide to use, be FAITHFUL in adhering to the protection offered by the stop. In other words, Do not CHANGE IT. If you are stopped, you're stopped. He who trades and runs away lives to trade another day!
Equally important is allowing your profits to improve AT THE Same TIME! Here's tips on how to do that.
RULE 3. Whenever you become profitable in a trade, substitute the stop loss with a TRAILING stop, trailing by that amount of profit.
This one is so important that I believe it should be the twenty second amendment to our Constitution! Say you're up twenty-five cents in a trade and you've got your stop loss in at fifty cents below your entry.
Replace the stop loss with a 25 cent trailing stop. At this point, you WORST CASE outcome for the trade is BREAK EVEN (give or take a couple of pennies)!!! On my live trading lab on my website, I typically refer to this as the MAGIC point during the trade. You have got virtually NOTHING to lose and EVERYTHING to gain from that point on !
Finally, for the 'do-it-yourself- traders:
RULE 4. Leave the trade alone from this point on!
If you're in doubt, seek the advice of any investment professional on easy methods to successfully raise capital. All you need to do is search: public shell or reverse merger.
The market overall will do a much better job of managing the trade than you or I EVER could! Once you've reached the MAGIC POINT in your trade, just go away and go do something else. Your trade is on autopilot!
Penny Stock Investing For Any Novice Or Investment Expert
For those wanting to get a taste of trading, but do not know much about the stock market, penny stock is a great place to start. They are stocks that trade for as low as 1 cent, but they cost no more than $5.
Wealth Building: Practical Information On Making Potential Investments For The Future
If you are ready to invest money for a future event, such as retirement or a child's college education, you have several options.
Generate Profits Quickly: The Reasons Why You Need To Invest
Investing is something that has become increasingly important over the years, especially while the future of social security benefits becomes unknown.
Choose Your Investments Carefully Simply By Determining Your Current Investment Style
Knowing what your risk tolerance and investment style are will help you choose investments wisely. The three investment styles are conservative, moderate, and aggressive.
The Best Way To Become The Most Profitable Investor: Understanding The Significance Of Diversification
Diversification is the key to successful investing. All successful investors build portfolios that are widely diversified, and you should too!
Investing Essentials - What Precisely Are Your Financial Ambitions? Starting At Square One
When it comes to investing, many first time investors want to jump right in with both feet. Unfortunately, very few of those investors are successful.
Various Types Of Stocks That An Individual Can Put Money In
Investing in bonds is very safe, and the returns are usually very good. There are four basic types of bonds available and they are sold through the Government, through corporations, state and local governments, and foreign governments.
Allow me to share 4 RULES for trading which directly deals with losses and if followed, can 'plug' many of your profit leaks!
RULE 1. Wait for the stock to CONFIRM the anticipated direction before entering the trade.
This rule can decrease the NUMBER of losses you encounter. As simple as that sounds, it is one of the most frequently violated principles of very good trading habits. So often is this rule broken that we are all familiar with cute little descriptions such as "catching a falling piano", or "reaching for a falling knife."
What you use for this confirmation is your own decision; price rise or fall, momentum, frequency of trades or bid / ask "size" are simply just a couple of options. Personally I combine them all (more or less), developing a 'feeling' about the confirmation, rather than a measurable quantity.
However you choose to define confirmation, let experience be your most effective teacher here. Do not enter the trade until you are absolutely convinced the stock is shifting your direction!
RULE 2. Whenever you are filled on the entry, place a STOP loss to minimize your potential for loss.
This rule controls the Amount you can lose on any one trade. I like to use about half of the stocks daily movement for my stop loss amount. As an example, if a stock price moves on average, say one dollar each trading day, then I'll back off 1/2 of that, or 50 cents and place my stop loss there. This limits the losses possibly incurred on that trade.
Whatever you decide to use, be FAITHFUL in adhering to the protection offered by the stop. In other words, Do not CHANGE IT. If you are stopped, you're stopped. He who trades and runs away lives to trade another day!
Equally important is allowing your profits to improve AT THE Same TIME! Here's tips on how to do that.
RULE 3. Whenever you become profitable in a trade, substitute the stop loss with a TRAILING stop, trailing by that amount of profit.
This one is so important that I believe it should be the twenty second amendment to our Constitution! Say you're up twenty-five cents in a trade and you've got your stop loss in at fifty cents below your entry.
Replace the stop loss with a 25 cent trailing stop. At this point, you WORST CASE outcome for the trade is BREAK EVEN (give or take a couple of pennies)!!! On my live trading lab on my website, I typically refer to this as the MAGIC point during the trade. You have got virtually NOTHING to lose and EVERYTHING to gain from that point on !
Finally, for the 'do-it-yourself- traders:
RULE 4. Leave the trade alone from this point on!
If you're in doubt, seek the advice of any investment professional on easy methods to successfully raise capital. All you need to do is search: public shell or reverse merger.
The market overall will do a much better job of managing the trade than you or I EVER could! Once you've reached the MAGIC POINT in your trade, just go away and go do something else. Your trade is on autopilot!
Penny Stock Investing For Any Novice Or Investment Expert
For those wanting to get a taste of trading, but do not know much about the stock market, penny stock is a great place to start. They are stocks that trade for as low as 1 cent, but they cost no more than $5.
Wealth Building: Practical Information On Making Potential Investments For The Future
If you are ready to invest money for a future event, such as retirement or a child's college education, you have several options.
Generate Profits Quickly: The Reasons Why You Need To Invest
Investing is something that has become increasingly important over the years, especially while the future of social security benefits becomes unknown.
Choose Your Investments Carefully Simply By Determining Your Current Investment Style
Knowing what your risk tolerance and investment style are will help you choose investments wisely. The three investment styles are conservative, moderate, and aggressive.
The Best Way To Become The Most Profitable Investor: Understanding The Significance Of Diversification
Diversification is the key to successful investing. All successful investors build portfolios that are widely diversified, and you should too!
Investing Essentials - What Precisely Are Your Financial Ambitions? Starting At Square One
When it comes to investing, many first time investors want to jump right in with both feet. Unfortunately, very few of those investors are successful.
Various Types Of Stocks That An Individual Can Put Money In
Investing in bonds is very safe, and the returns are usually very good. There are four basic types of bonds available and they are sold through the Government, through corporations, state and local governments, and foreign governments.