Let Your Profits Run
When you have a profitable trade the fear of losing unrealized cash will cause you to want to quit while you are ahead. Most trading consists of small winners and losers over a long time, with a few big winners.
This is what makes the difference between profitability, breaking even or losing. Your ability to let big winners happen determines your yearly performance.
The key is to have trailing stops outside the noise of the market so they don't get stopped out during the normal trading process. Prepare yourself to give up a large portion of a trade's open profit makes this difficult to implement.
Adding to a winner and widening your stops (do not widen your stops if you are already in a trade) helps you capture the largest amount of profit. Your trade has shown itself to be a winner, the risk is low, add to the position rather than implement stops that are too tight.
It is imperative that your rules are pre-defined allowing for large winning trades.
Cut your losses short - This rule is as difficult as the one above. Just as profitability comes from big wins, preserving your capital comes from avoiding the big losers.
Setting a maximum loss point allows you to know how much is being risked on this position. Your exit price tells you a trade is a loser and when to exit. 100% accuracy in regards to our maximum loss is unobtainable due to gaps at the open and because of limit moves in futures. Having these rules and keeping them saves us from catastrophic loses when we have a series of trades that keep going against our position.
A losing position at your maximum loss point means get out right away. Trades are either winners or losers. The chances of a losing trade turning around are absolutely unknown to any of us. Accept the loss, move on. Financially and mentally you will be in a much better place. Even if this loser turned around, the stress and bad feelings from holding your position are not worth it.
LEARN TO TRADE THE FOREX THE RIGHT WAY
To your Success
Kenneth Arnold
Forex World Blog
Forex Trading For Newbies The Tool Every Forex Trader Should Have.
Forex World Blog Your #1 Online Forex Trading Community.
This is what makes the difference between profitability, breaking even or losing. Your ability to let big winners happen determines your yearly performance.
The key is to have trailing stops outside the noise of the market so they don't get stopped out during the normal trading process. Prepare yourself to give up a large portion of a trade's open profit makes this difficult to implement.
Adding to a winner and widening your stops (do not widen your stops if you are already in a trade) helps you capture the largest amount of profit. Your trade has shown itself to be a winner, the risk is low, add to the position rather than implement stops that are too tight.
It is imperative that your rules are pre-defined allowing for large winning trades.
Cut your losses short - This rule is as difficult as the one above. Just as profitability comes from big wins, preserving your capital comes from avoiding the big losers.
Setting a maximum loss point allows you to know how much is being risked on this position. Your exit price tells you a trade is a loser and when to exit. 100% accuracy in regards to our maximum loss is unobtainable due to gaps at the open and because of limit moves in futures. Having these rules and keeping them saves us from catastrophic loses when we have a series of trades that keep going against our position.
A losing position at your maximum loss point means get out right away. Trades are either winners or losers. The chances of a losing trade turning around are absolutely unknown to any of us. Accept the loss, move on. Financially and mentally you will be in a much better place. Even if this loser turned around, the stress and bad feelings from holding your position are not worth it.
LEARN TO TRADE THE FOREX THE RIGHT WAY
To your Success
Kenneth Arnold
Forex World Blog
Forex Trading For Newbies The Tool Every Forex Trader Should Have.
Forex World Blog Your #1 Online Forex Trading Community.
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