If You’re Disciplined, Here’s A TechniqueThat Could Make You More Profitable
Stick With A Trade Even If Your Stop Is Hit?
Have you ever gotten stopped out of a trade and then watch in agony as the
stock reverses and takes off without you? If you are VERY disciplined,
here’s a technique to help keep you in potential winning trades.
A stop can be of two forms: a “hard” stop where the order is
actually placed or a “mental stop”–an area, if hit, you will
then exit with a market order if the stock continues to move against you.Â
If you are new to trading or lack discipline, then by all means, use a hard
stop. This makes exiting a trade a passive decision and not an active
one. However, if you are experienced and disciplined, then you can use a
mental stop. This allows you to “trade out” of an adverse move (i.e.
damage control) or to possible stay in long enough to catch a reversal (should
it ensue).Â
Let’s take a look at Itron
(
ITRI |
Quote |
Chart |
News |
PowerRating), mentioned recently. Notice that the
stock did come down and touch the stop twice (a) but quickly reversed off of
those levels. The stock subsequently takes off (b). Although the stock “officially” hit the stop, it really didn’t do any “wrong”–it found
support at support. Â
Of course they don’t always come back. If the stock continues to slide, you
have to push the eject bottom. In trading there are trade offs (maybe that’s why
they call it trading). Using a mental stop will occasionally give you a bigger
loss on those stocks that do not immediately reverse. And worse, you can end up
with a huge loss if
you lack discipline or forget to pay attention.Â
The above (and some other stuff) was covered in more detail earlier today in my
weekly audio/visual presentation. Email me if you would like a (free) link to the
recording of this show and/or the links for the prior year (covering trading
psychology, scanning, sector analysis, picking the
best setups, position management, damage control,etc).Â
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
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