1) Focus on being profitable for the week – Individual trades may go against you and individual trading days can offer little opportunity. As a senior trader once explained to me, for the active trader, however, there are enough fresh opportunities in a week to make it reasonable to set a goal of being profitable for the week. You won’t reach your goal every single week, but the mere act of setting the goal keeps you focused. For example, you don’t want to lose so much money in a single day that you can’t make it back during the other days of the week. You also don’t want to lose so much money on a single trade that you can’t come back during the remainder of the day. When you really push yourself to be profitable every week, you don’t let individual days get away from you. And when you don’t let individual days get away from you, you start managing each trade carefully to ensure that your largest loss won’t exceed your largest gain. Time and again I’ve seen a consistent sign of progress among developing traders: they stop digging themselves into holes.
2) Take what the market gives you – Today I peeled out of several short positions after a spate of very negative TICK readings in the afternoon. I’ve learned that such concentrated selling often precedes nasty short-covering rallies. My S&P position hadn’t made as much profit as my NASDAQ and Russell positions, but the market doesn’t care about that. I took what the market gave me and started the week green. Did the market go down even further after I exited? Absolutely. As one experienced trader explained to me, when the market rewards your position right off the bat, you want to take something off the table. You might let a piece of your position ride if you have a longer-term opinion, but never give green a chance to become red. A winner that turns into a loser is a double loss. (more…)