Yes, in fact many a time I've considered typing up a checklist of points I have to review before making any trade - because when I lose money, it's almost always from breaking a rule, acting impulsively and the like. I'm not completely above getting emotional even though I'm pulling in a 180% annual return, which obviously is nothing to beat yourself up about.
The trouble with rules like cut your losses quickly is the wide variance between individual scenarios - like 1/2 point spreads on $14 stocks (see SYNT today) - it's hard to take that half point off and get out if you bought at the ask yesterday. Also, I've had poor luck with stop loss orders - I was eventually shaken out of SYNT at 14, my stop loss I set at 15 3/4. It dipped about a point in 15 minutes; you can't have your eyes glued to the screen at all times.
So you could adopt another rule not to trade stocks with large spreads... a rule I almost always follow.
Ah, I don't know ... you take losses sometimes. There's no way around it. But I agree with both your guidelines, "cut your losses quickly and let your profit run". Are there any other rules anyone on this board cares to offer?
Here are a few of mine:
Never enter a position in a stock you heard about for the first time less than 24 hours ago, and never buy without a long look at the chart.
Slow down your number of trades if you've been on a good run ... or even cash out and take some days off.
Never more than 30% of day trading portfolio in a single stock.
Finally, the rule I should have followed this morning:
In the evening, make a note of how you expect each of your positions to behave in the first few trades of the day. When the time comes, if it's not behaving the way you thought, to hell with it - just get out. SYNT shot up at first this morning, as I expected, but a couple of sells at the bid followed that spooked me. However, rather than being a good boy and panicking, I held on to see what developed. Well, to heck with hanging on. I make money far more often with stocks that behave almost exactly as I expect than with stocks that seem iffy. It's definitely better to miss out on a potential gain than to take a loss.
In the meantime, at least INVX was good to me. |
