shaun Rosenberg

Following your trading rules once they are Set

Perhaps the most difficult part of trading is following your trading rules after you have already set them.  Most people think finding the right rules to follow is the hard part, it isn’t.

Perhaps the most difficult part of trading is following your trading rules after you have already set them.  Most people think finding the right rules to follow is the hard part, it isn’t.

Finding trading strategies that work is easy.  The internet is full of traders selling their systems and information on how to make your own.   The hard part about trading is actually following your trading rules once they are set.

For instance you may decide to buy a stock when it is trading at $50 in hopes for it to reach $60.  You also plan to exit if the stock falls down to $48, simple enough.  However many people who intended to take a trade like this will continue to hold onto it even when the stock goes to $48 and lower.

Holding onto a trade and hoping it will eventually come back is a bad idea, especially if that is not what you were planning to do when you first entered the trade. This could lead to larger losses then you would have expected.

To prevent letting your fear of loss stop I recommend putting actual stops on any stocks you are trading.  They can be great for loss prevention and also can help you follow your rules without having to deal with emotions.

Setting a stop can help you get out of losses to late but you will have to work on not getting out of winners too early as well.  If that same stock went up to $57.5 you would be very egger to sell it and take a profit, after all you are up 15%.

But unless it has hit your profit target it is actually a bad idea to get out of a winning trade to early.  There is a famous saying “You can’t go broke taking a profit.”  I would have to disagree.  If you take your profits too early you may not be able to pay for your losses.  In which case taking an early profit can be a very bad thing.

Article Tags: Trading Rules Once, Trading Rules, Rules Once

Source: Free Articles from ArticlesFactory.com

ABOUT THE AUTHOR