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CUT YOUR LOSERS

After our last round of classes we have focused on the imporatance of being able to put a percentage to everything we see within the market.  By doing this we are able to always have a grasp on what way a stock will go, but contrary to the belief knowing what a stock will do is secondary.

I want you to think about your trading right now. How many times it felt like a market maker was sitting right behind you knowing exactly what you did, the trades you took that shook you out even with a high percentage and every other negative you can find in your trading.  What if there was something you could do so those negative parts didn't affect your profit and loss as much as they did.

I have spent over 10 years trying to master my craft and in that time i have met thousands of traders.  Theres one key that they all figured out and it's cutting your losers.  A gameplan is the most important part of trading.  Theres never been a consistant trader that can live off guessing, they live off habit and the exact gameplan they take in every trade.  Most traders think that their price target is the most imporatnt part of the gameplan but as simple as it sounds its all about cutting your losers.

Ahead of the Charts Trading

Founder and CEO

Richard Lepis

There should never be a trade you take that you dont have a specific number where if it breaks you get out.  Here at ATC we use 1:4; 1:5.  What that means if a stock can move $1 we can only be willing to lose 20-25c in order for the risk vs reward to make sense.  One of the biggest psychological problems a trader is faced with is when a stock goes the opposite way.  We have all been in the position where our stop loss is 20c, but than we add another 20c and another and another.

This is the death of traders.  Do yourself a favor this week and go over your biggest losers that take away from your winners.  Each and everytime by having the exact gameplan to get out at a certain number is what allows you to actually make money on the next winning trade. 

Losers are guarantteed so we need to make sure we understand them and cut them based off the amount we expected to make in the beginning of the trade. 

Since 90% of people fail in this game, and the 10% that win are all worried more about what they can lose than what they can make it makes things pretty black and white.  Create a gameplan first with what you can lose and what you can make will become secondary. Even a trader that has a 50% win percenatge can become profitable with the primary mindset of what i can lose first and what i can make second. 

 

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