Solving A Common Trading Problem

I had a conversation recently with a trader who wasn’t
doing as well as he thought he should have been doing. He felt his biggest problem
was that he was either too slow to pull the trigger, or just chickened out.
When a setup triggered, before entering, he would start looking around for confirmation.
What were the indices doing? What about the tick? Were all of his other market
indicators flashing green? If he could find an excuse not to enter the trade,
he would avoid taking it. If he couldn’t find an excuse not to enter the
trade, many times, by the time he was able to determine the “all clear”
signal was there, the stock had already rallied far past his buy point.

This is a very common problem for traders. Too many variables
can really muddle your thinking. If you need to be right about the market, and
a stock’s fundamental picture, and its technicals, and the economy, and
it has to be the right time of day, and on and on — just to have a profitable
trade — then you’re doomed. Find some securities that fit the style of trading
you prefer. Use simple triggers to enter them. Practice good money management
and profits will materialize (assuming your criteria are reasonable and your
trading setups provide you an edge). If a stock that meets your criteria triggers,
take the trade. If you think the market conditions are favorable for your particular
strategy, bet bigger. If not, bet smaller, keep stops tighter, take partial
profits quicker or do whatever you believe it takes to reasonably control your
risk while giving the trade a chance to work.

Keep it simple and do your thinking before the setup triggers,
and you should have no problem executing your trades.

Good Trading,

robhanna@rcn.com