Post by He Shuhan on Jun 25, 2006 15:16:35 GMT -4
1. Go To Sleep
If the day's a flat day, go to sleep. If the market is so volatility and you just came back from work and you do not have an appropriate trading plan for the day, take a break. Turn on the air conditioner, cool yourself down, and replan your attack. Your second battleground will come in after lunch, and that is your entry.
Do not waste time monitoring the market on a 1 or 2 minute chart unless you swing trade every hour. If you do that, you are basically trying to beat the floor traders and that's really not a simple task, even for institutional traders. Nothing collosal is probably going to happen if the market's flat. And if it does, the only thing that's gonna happen is you watching your profits go down the drain, luring you to click Transmit and successfully completing the Wash-and-Rinse ritual trap set by market makers.
What you must really do, is to set a logical stop loss, as demonstrated in the video tutorials and let it do all the work for you.
The next day when you wake up, check the price of the underlying and decide whether you want to continue holding your current trading plan; or revise it for a better exit.
Only stay up if you're a Scalper; or that you seriously want to dedicate time to the market. (advisable only if you trade for a living)
2. Take the Loss
Take the loss like a real man and a real woman and a real disciplined trader. Don't be disheartened if you are afraid to lose because that is your in built mechanic to protect yourself. I certainly is very afraid to lose but training has built up my discipline to take losses when I have to. If I can do it, so can you. If you're wrong, just take it and don't ask any negative questions.
A good question would be: How do you know you are wrong? You are wrong when there are only less than 2 weeks left till expiration and the trend indicator (once again, shown in my video tutorial) reveals that the probability of the stock returning in your favor is too low (ie. Less than 20%).
Do note that stocks frequently throwback (or retrace and rebounce) at least 30% after 10-15 day candles. If you're fortunate, you can make use of this golden situation to get out with significantly lesser losses (provided you do it the manual way).
As Conrad has probably pointed out, once you're in a position you must be prepared to lose it all. Don't be surprised when a option lose a few thousand in days. Taking losses is part of the game plan.. If we don't want to lose, don't trade. In that case, we should probably stop eating and breathing as every breath we take we oxidise and go a step closer to death. (which is probably not a bad thing from a religious perspective) Do note, however, that 1 single homerun trade, giving you more than 400% profits, will give you an overall green. And that is the essense of trading. I would like to extend me thanks to Donnie for this precious and timely insight.
Once again, let the stop loss do the work for you.
3. Take the Profit
Learn to take the money off the table before it eats into your psychology. Once you reach a decent profit level, say, 30% in 2 days or so (non-news related events), sell half of your position. It's always good to leave some money on the table for others to take. That ensures that you do not gamble your money away.
Profit taking, in my opinion, is even harder than cutting losses short. This is really because there are so many occassions that option traders take losses, and they want to fully capitalise on the few winning trades to win back or take revenge.
However, the reality is often not so beautiful and traders trying to build a royal flush end up holding the position and an alligator spread if they repair it wrongly.
As mentioned previously, there are many retracements and rebounce in the market so patience is key to sit through all these bumps for your pot of gold! Stick to your faith, and your trading plan. It doesn't really matter as they are just nomenclatures of either classes of judgemental or non-judgemental trading systems. Just follow through the system like you would a 300 metre rifle shot. And not to forget, believe in yourself unquestioningly, for it is your lifeline. By this statement I do not mean the extremity of holding on to your ego when you have a losing trade. This may sound contradictory, but that's what trading psychology is all about. The word - Flexibility.
And lastly, for more profitable and precise profit taking method, try Fibonacci or measured moves (or what Mario "Ah Tan" Luciano calls Farbonicchi). If you don't know how, be sure seek help. ***Hint: Help is available here in this forum.
If the day's a flat day, go to sleep. If the market is so volatility and you just came back from work and you do not have an appropriate trading plan for the day, take a break. Turn on the air conditioner, cool yourself down, and replan your attack. Your second battleground will come in after lunch, and that is your entry.
Do not waste time monitoring the market on a 1 or 2 minute chart unless you swing trade every hour. If you do that, you are basically trying to beat the floor traders and that's really not a simple task, even for institutional traders. Nothing collosal is probably going to happen if the market's flat. And if it does, the only thing that's gonna happen is you watching your profits go down the drain, luring you to click Transmit and successfully completing the Wash-and-Rinse ritual trap set by market makers.
What you must really do, is to set a logical stop loss, as demonstrated in the video tutorials and let it do all the work for you.
The next day when you wake up, check the price of the underlying and decide whether you want to continue holding your current trading plan; or revise it for a better exit.
Only stay up if you're a Scalper; or that you seriously want to dedicate time to the market. (advisable only if you trade for a living)
2. Take the Loss
Take the loss like a real man and a real woman and a real disciplined trader. Don't be disheartened if you are afraid to lose because that is your in built mechanic to protect yourself. I certainly is very afraid to lose but training has built up my discipline to take losses when I have to. If I can do it, so can you. If you're wrong, just take it and don't ask any negative questions.
A good question would be: How do you know you are wrong? You are wrong when there are only less than 2 weeks left till expiration and the trend indicator (once again, shown in my video tutorial) reveals that the probability of the stock returning in your favor is too low (ie. Less than 20%).
Do note that stocks frequently throwback (or retrace and rebounce) at least 30% after 10-15 day candles. If you're fortunate, you can make use of this golden situation to get out with significantly lesser losses (provided you do it the manual way).
As Conrad has probably pointed out, once you're in a position you must be prepared to lose it all. Don't be surprised when a option lose a few thousand in days. Taking losses is part of the game plan.. If we don't want to lose, don't trade. In that case, we should probably stop eating and breathing as every breath we take we oxidise and go a step closer to death. (which is probably not a bad thing from a religious perspective) Do note, however, that 1 single homerun trade, giving you more than 400% profits, will give you an overall green. And that is the essense of trading. I would like to extend me thanks to Donnie for this precious and timely insight.
Once again, let the stop loss do the work for you.
3. Take the Profit
Learn to take the money off the table before it eats into your psychology. Once you reach a decent profit level, say, 30% in 2 days or so (non-news related events), sell half of your position. It's always good to leave some money on the table for others to take. That ensures that you do not gamble your money away.
Profit taking, in my opinion, is even harder than cutting losses short. This is really because there are so many occassions that option traders take losses, and they want to fully capitalise on the few winning trades to win back or take revenge.
However, the reality is often not so beautiful and traders trying to build a royal flush end up holding the position and an alligator spread if they repair it wrongly.
As mentioned previously, there are many retracements and rebounce in the market so patience is key to sit through all these bumps for your pot of gold! Stick to your faith, and your trading plan. It doesn't really matter as they are just nomenclatures of either classes of judgemental or non-judgemental trading systems. Just follow through the system like you would a 300 metre rifle shot. And not to forget, believe in yourself unquestioningly, for it is your lifeline. By this statement I do not mean the extremity of holding on to your ego when you have a losing trade. This may sound contradictory, but that's what trading psychology is all about. The word - Flexibility.
And lastly, for more profitable and precise profit taking method, try Fibonacci or measured moves (or what Mario "Ah Tan" Luciano calls Farbonicchi). If you don't know how, be sure seek help. ***Hint: Help is available here in this forum.