Eating Healthy for Life

Are You Interested In Increased Profits? Then Focus On Decreased Losses!

Let me share some RULES for trading which directly deals with losses and if followed, can 'plug' a lot of of your profit leaks!

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

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

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

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

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

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

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

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

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

This one is so important that I think it should be the twenty second amendment to our Constitution! Say you are up 25 cents in a trade and you have got your stop loss in at fifty cents below your entry.

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

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

RULE 4. Leave the trade alone from this point on!

If you're in doubt, seek the advice of an investment professional on the best way to successfully raise capital. All you need to do is explore: public shell or reverse merger.

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

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