90% of traders burn through their account in the first year for one simple reason…big losses.
Most of them never see it coming.
Trust me, I know from experience.
You could be trading well for weeks, even months, and then out of nowhere…BAM!
So, what causes these black holes in our accounts?
More often than not, it’s us…
Well, our emotions to be precise.
No one can help it when they get mad at a loser or elated at a winner.
But trying to stiffen yourself up like a statute isn’t going to work either.
Honestly, do you think Navy Seals aren’t scared when they’re dropped into enemy territory?
They’re terrified!
The difference is they’re prepared.
Look, I’m one of the most gregarious people I know.
I wear my emotions on my sleeve.
Heck this is me calmly explaining the concept during our SteadyTradeTeam premarket webinar.
You can’t change who you are any more than I can talk with my hands tied to my sides.
Nor should you.
And I won’t lie to you and say it’s easy to keep the FOMO goblin or aggro monster in their cages.
However, I’ve got some time tested strategies to help you recognize and work around them.
And they’re simple enough that anyone can use them regardless of your style or expertise.
Focus on Entries
Everyone wants to know where to take profits.
Funny thing is, that question usually comes before asking about the entry.
Let me throw a simple idea at you.
Imagine I had a trade with an entry at $1.00 with a profit target of $1.20 and a stop loss of $0.80.
Since the target and stop loss are $0.20 away, I’d need to win this setup more than 50% of the time to come out ahead.
Now suppose I waited a little bit longer for an entry at $0.95.
That $0.05 move closer to the stop now means I’m risking $0.15 to make $0.25.
I’d only need to win that trade 37.5% of the time or more to make money.
If you know where your stop is, the closer you get your entry, the better your potential payout for your risk.
That’s why I NEVER chase entries.
Every penny I get higher works against me by increasing my risk and decreasing my profit potential – a double whammy.
So, when you decide a trade is a ‘Go,’ stick with your entry price.
Sometimes, the stock will run away.
Don’t worry. There is always another trade around the corner.
Respect Your Stops
Tim Sykes is a big fan of cutting losses quickly.
I couldn’t agree more.
Plenty of folks struggle to physically click the button to stop out their trades.
If that’s you, here are two things to try.
First, drop in your stop loss order as soon as you get filled on your entry.
You might get stopped out by market makers. But at least you will avoid big losses.
Second, practice losing.
I know it sounds funny, but try it with small amounts or even paper money.
Just get used to the action of sticking with your stop.
When it’s time to act with real money, you’ll be like a Navy Seal, trained to perform in your sleep.
Know Thyself
The question that came up in the SteadyTradeTeam, which prompted the discussion, was whether or not to get aggressive premarket…
…specifically with Jasper Therapeutics Inc. (NASDAQ: JSPR).
I responded by asking the following question…
…how did you do last week and last month?
Not everyone finished the year on a healthy trade.
Many of the setups leading into the New Year weren’t easy.
So, I didn’t want folks to ‘revenge’ trade just because they saw a decent setup.
Aggressive trading should only happen once you’re consistent and comfortable.
And it should be used sparingly.
If you have any doubts whether you should try it…don’t.
There are plenty of profits to be made sticking with the 9:45 a.m rule.
The last thing anyone should do is compound losses or take excess risk with the wrong mindset.
And Remember…
When in doubt, talk it out.
Use the chat rooms or email me.
I’m here to help you stay on the right path.
Until next time,
Tim Bohen
Lead Trainer, StocksToTrade