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Personal Responsibility and Decision-Making
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PristineTrading, in The Markets
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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 HFblogNews · Posted
Date: 22nd November 2024. BTC flirts with $100K, Stocks higher, Eurozone PMI signals recession risk. Asia & European Sessions: Geopolitical risks are back in the spotlight on fears of escalation in the Ukraine-Russia after Russia reportedly used a new ICBM to retaliate against Ukraine’s use of US and UK made missiles to attack inside Russia. The markets continue to assess the election results as President-elect Trump fills in his cabinet choices, with the key Treasury Secretary spot still open. The Fed’s rate path continues to be debated with a -25 bp December cut seen as 50-50. Earnings season is coming to an end after mixed reports, though AI remains a major driver. Profit taking and rebalancing into year-end are adding to gyrations too. Wall Street rallied, led by the Dow’s 1.06% broadbased pop. The S&P500 advanced 0.53% and the NASDAQ inched up 0.03%. Asian stocks rose after Nvidia’s rally. Nikkei added 1% to 38,415.32 after the Tokyo inflation data slowed to 2.3% in October from 2.5% in the prior month, reaching its lowest level since January. The rally was also supported by chip-related stocks tracked Nvidia. Overnight-indexed swaps indicate that it’s certain the Reserve Bank of New Zealand will cut its policy rate by 50 basis points on Nov. 27, with a 22% chance of a 75 basis points reduction. European stocks futures climbed even though German Q3 GDP growth revised down to 0.1% q/q from the 0.2% q/q reported initially. Cryptocurrency market has gained approximately $1 trillion since Trump’s victory in the Nov. 5 election. Recent announcement for the SEC boosted cryptos. Chair Gary Gensler will step down on January 20, the day Trump is set to be inaugurated. Gensler has pushed for more protections for crypto investors. MicroStrategy Inc.’s plans to accelerate purchases of the token, and the debut of options on US Bitcoin ETFs also support this rally. Trump’s transition team has begun discussions on the possibility of creating a new White House position focused on digital asset policy. Financial Markets Performance: The US Dollar recovered overnight and closed at 107.00. Bitcoin currently at 99,300, flirting with a run toward the 100,000 level. The EURUSD drifts below 1.05, the GBPUSD dips to June’s bottom at 1.2570, while USDJPY rebounded to 154.94. The AUDNZD spiked to 2-year highs amid speculation the RBNZ will cut the official cash rate by more than 50 bps next week. Oil surged 2.12% to $70.46. Gold spiked to 2,697 after escalation alerts between Russia and Ukraine. Heightened geopolitical tensions drove investors toward safe-haven assets. Gold has surged by 30% this year. Haven demand balanced out the pressure from a strong USD following mixed US labor data. Silver rose 0.9% to 31.38, while palladium increased by 0.9% to 1,040.85 per ounce. Platinum remained unchanged. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HFM Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Andria Pichidi HFMarkets Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission. -
By Stocks4life · Posted
A few trending stocks at support BAM MNKD RBBN at https://stockconsultant.com/?MNKD -
By Stocks4life · Posted
BMBL Bumble stock watch, pull back to 7.94 support area with high trade quality at https://stockconsultant.com/?BMBL -
By Stocks4life · Posted
LUMN Lumen Technologies stock watch, pull back to 7.43 support area with bullish indicators at https://stockconsultant.com/?LUMN
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