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By inthemoneystocks
One of the most important reasons why traders take big losses is because they often fail to recognize when a trade has gone wrong. You see, stopping out of a trade is probably the biggest fault of traders and investors. Often, this happens to young and inexperienced traders and investors, but I know many veteran traders and investors that struggle with this as well. Early in my own career I struggled with stopping out of a bad trade myself, so I can sympathize with this problem.
The problem with taking a loss is really two fold. First, the trader has to admit that he is wrong. As you all know, as human beings we all hate to be wrong. The ego simply gets in the way and we all want to always be right all the time. The first secret in this business is to check the ego at the door. The market does not care about your the color of your skin, religion or anything else. It will move in the direction of the money and that is the bottom line. Once a trader or investor goes into what I call 'hope mode' the trade is over. I'm sure everyone has been in this position at one time or another. Simply put there is no room for ego or hope in the stock market. The market is always right and there is no reason to fight it.
Here is the second problem with taking a loss, it hurts. Pain and pleasure are the two reasons why humans do anything at all. As a human being, we are always looking to have pleasure and avoid pain. Well, losing money is painful and many people would rather simply hold a losing equity than lock in a small loss and move on. I cannot tell you how often I see a trader hold a losing trade only to see the position move further out of the money. Many years ago I watched a day trader blow up a $200,000 account in a single day averaging in on a bad day trade. To this day I can remember the look on his face as his money vanished in thin air. Believe it or not, this trader could have exited the position with a $500.00 loss, but instead he kept averaging in and fighting the position until he was wiped out. As a rule, once you have your full position you should never average in on a trade. At that point, it is critical to know where your max loss is going to be and stop out if that level is breached.
Now when should we stop out? The answer to this question is not that simple, but here is what I personally do. I always place my stop loss below an important breakout or pivot on the chart. You see, prior breakout or pivot levels are usually defended when retested. After all, this is usually an area where institutional traders and investors got involved, that is why there is a pivot low or high on the chart to begin with. If that level is breached on a closing basis then I will move out of the position. So If I took a trade based on a daily chart pattern then I will usually check the daily and weekly chart levels. If there is a major pivot on the weekly chart then I will use a week chart close as my stop out level. While this method may not be perfect, it has saved me from much bigger losses when I have been wrong.
Nicholas Santiago -
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By Stocks4life · Posted
VRA Vera Bradley stock watch, pull back to 5.08 support area at https://stockconsultant.com/?VRA -
By Stocks4life · Posted
MU Micron stock watch, pull back to 102.83 gap support area with high trade quality at https://stockconsultant.com/?MU -
By Stocks4life · Posted
ACLX Arcellx stock watch, trending at 84.6 support area with bullish indicators at https://stockconsultant.com/?ACLX -
Here’s something few are talking about: The Chinese are printing money like it's going out of style. Not that you'd hear about it in the mainstream news. But Bitcoin knows. Bitcoin always knows. Here’s the thing… When the Chinese government prints money to paper over the cracks, their smart money doesn't sit around waiting to get devalued. It usually flows into three things: Bitcoin, gold, and dollars. After years of being beaten down, gold's having one of its best years in decades. But here's the secret -- whatever gold does, Bitcoin's going to do it bigger. Much bigger. Since last November, when China started their printing spree, Bitcoin's been moving in near-perfect correlation with the People's Bank of China's balance sheet. Over 80% correlation, maybe even 90%. Again, few are talking about it. But here's why this matters right now: This could be the beginning of a huge breakout in the crypto markets. Bitcoin broke above its July high, and historically, that's led to new all-time highs over 90% of the time. The only times it failed? COVID and the 2022 bear market. That's it.” – Chris Campbell Profits from free accurate cryptos signals: https://www.predictmag.com/ -
Originally Answered: How can I compete with people who are better than me in every way? So you want to outcompete people who are smarter, better looking and more experienced than you? No problem! All you have to do is outwork them. Will Smith said, "if we both get on a treadmill either you're going to get off first or I'm going to die trying." Most people just aren't willing to work that hard. Sure, they'll show up for the job interview and maybe practice in front of the mirror for a few minutes, but they won't do hours and hours of research and prepare for weeks. They won't wake up early and stay up late working on their dreams. So while all those smart, good-looking, experienced people are waiting around for the next opportunity to come their way, you can outwork them and create your own opportunities. In a few years, you'll be that "smart" person everyone looks up to. But you'll be different. You'll know it was your hard work, your inner strength and your commitment to living a great life that made you successful and brilliant - not luck or good genes.” – Tom Corson-Knowles, Quora Profits from free accurate cryptos signals: https://www.predictmag.com/
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