Improve Your Trading Revenue And Decrease Your Losses

Do You Want Increased Profits? Then Focus On Decreased Losses!

Let me share some RULES for trading which directly address losses and if followed, can 'plug' many of your profit leaks!

RULE 1. Wait for the stock to CONFIRM the expected direction just before entering the trade.

This rule can minimize the NUMBER of losses you experience. As straightforward as that sounds, it's one of the most typically violated principles of good trading habits. So often is this rule broken that we are all familiar with cute little descriptions like "catching a falling piano", and even "reaching for a falling knife."

What you may use for this confirmation is your own affair; price rise or fall, momentum, number of trades or bid / ask "size" are just some ways. Personally I combine them all (more or less), developing a 'feeling' about the confirmation, instead of a measurable quantity.

Nonetheless you choose to define confirmation, permit experience be your best teacher here. Don't enter the trade until you're convinced the stock is going your direction!

RULE 2. When you are filled on the entry, place a STOP loss to minimize your potential for loss.

This rule regulates the Amount you could lose on any one trade. I prefer to use about 1/2 of the stocks day-to-day movement for my stop loss amount. For example, if a stock price moves on average, say one dollar each and every trading day, then I'll back off 1/2 of that, or 50 cents and put my stop loss there. This restricts the losses possibly incurred on that investment.

Whatever you use, be FAITHFUL in staying with the protection afforded by the stop. In other words, Do not CHANGE IT. If you're stopped, you're stopped. He who trades and runs away lives to trade some other day!

Equally necessary is permitting your profits to maximize AT THE Very Same TIME! Here's how you can do that.

RULE 3. Whenever you become profitable in a trade, replace the stop loss with a TRAILING stop, trailing by that amount of profit.

This is so important that I think it needs to be the 22nd amendment to our Constitution! Say you are up 25 cents in a trade and you have got your stop loss in at 50 cents below your entry.

Replace the stop loss with a 25 cent trailing stop. At this time, you WORST CASE result for the trade is BREAK EVEN (give or take a small number of pennies)!!! In my live trading lab on my internet site, I frequently refer to this as the MAGIC point during the trade. You have virtually NOTHING to lose and EVERYTHING to gain from that point on !

Lastly, for the 'do-it-yourself- investors:

RULE 4. Leave the trade alone from here on!

When in doubt, seek the advice of an investment professional on the best way to successfully raise capital. All you have to do is search: public shell or reverse merger.

The market overall will do a much better job of handling the trade than you or I EVER could! Once you have reached the MAGIC POINT with your trade, just go away and do something else. Your trade is certainly on autopilot!

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