“A string of losses can wreak havoc on your confidence. Believe me, I know this from experience. Over the years, I’ve gone through some significant drawdowns that left me wondering whether or not to just throw in the towel and quit.”
“People say trading is hard. What do they know? It’s only taken me two months to be a pro.” Honestly, I had to stifle a laugh when I heard that. I knew what was going to happen. I felt like Cassandra, cursed to see the future but never be believed. Ben was falling prey to two significant cognitive biases – traps you must avoid if you’re going to stay solvent.
What do bad drivers and poor traders have in common? They just don’t follow their signals. When the time is right you have to pull the trigger…
On a trip several years ago, I remember flying from Canada to Las Vegas. He gripped the armrests just a bit too tightly and forced a nervous smile when I looked at him. “This dude is either carrying a bomb, or else he HATES flying.”
When your positions don’t work out, you cannot lose your cool. The market doesn’t care about you, and the guy on the other end of the trade who won definitely won’t lose any sleep. Take a minute to see what went wrong. It could be that you went in a bit too soon or too late.
Whenever the market pulls back a little bit, and newer traders see red on the screen, they freak out. This is when I get panicked calls from new subscribers. I feel like a therapist talking them off the ledge of liquidating long positions that have a great chance of ending up winners.
You all know I’m a professional trader with over 20 years of market experience. Despite that, most people I meet don’t really know what I do. So when I’m traveling or even just going for groceries, I end up getting a lot of ‘hot stock tips’ from random people.
When placing a trade you must have a reasonable expectation of what you expect the underlying stock to do. If not, you’ll be trading purely on emotion. Here are some key ways to set your profit-taking levels.
Profitable traders know that profit-taking WILL happen. It’s basic market psychology…and if you’re going to make money, you can’t ignore this any more than an engineer can disregard the laws of physics.
Unless you’re blessed with unlimited funds, your goal should be to earn maximal profits with minimal capital. Sniper-like precision is always preferable to an artillery barrage. I want to tell you about a trick I use to let the market pay for my trades.