Is the money you risk on each trade real for you? Do you really accept the amount of money you are risking and are you willing to let it go? I find it helps me to think of risk as the amount of money I’m willing to spend to find out whether my edge is going to work on this trade. Note that I say spend. I actually think of each trade as though I’ve purchased a lottery ticket. I think that the amount of my stop has already been paid to find out if the edge works, so that as the trade proceeds I’m not afraid to lose anything. This is why the first point about knowing your expectancy is so important – if you trust your expectancy over a series of trades you don’t have to be afraid of the outcome of any single one.
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rssEXIT in Trading
Exit– The exit is critical to being a successful trader. Let your winners run and your losers run out quickly. Two factors determine your exit, the Target and the Stop loss you have set on entering the trade.
1. The Target is determined by the type of market and the trading history of the stock.
2. If the trade proceeds in your direction move the Stop loss keeping it tight.
3. It the trade continues to move, you may want to take your money off the table!
4. Profits should be taken before reaching a S/R. SO WHAT if it continues to run after you left!
5. Take Profits quickly and often! And remember discretion is the better part of valor.
6. The two most important factors in determining the Stop loss are the last S/R and providing enough margin for the trade to be successful. You must balance these against each other.
7. The Stop loss can be predetermined by your maximum loss limit but understand a small loss limit can positively impact your probability of success.
8. I must balance courage and common sense when staying in the trade. The money may be better used in another trade.
9. Remember small losses are the key to success in an environment where you may be wrong greater than 50% of the time.
10. Don’t give back, remember you can always get back in!
11. Don’t change my rules and therefore my settings.
Have Lunch with Warren Buffett for $25,000
An eBay auction is currently running this week, which is offering the winning bidder lunch with famed billionaire and investor Warren Buffett, one of the top three wealthiest people in the world.
All proceeds of the auction will be donated to the Glide Foundation in San Francisco, which provides help for the homeless and poor.
The current bid on the auction is $25,000, and if no one else bids, it wall be a bargain, as last year, the Canadian firm Salida Capital Corp. paid $1,680,300 for the lunch, and two yours ago, Zhao Danyang paid $2,110,100. The auction ends Jun 11, 2010 at 7:30 pm PDT or 10:30 Eastern time.