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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade
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To: Ken Wolff who wrote (67)1/7/1998 1:57:00 AM
From: Ken Wolff  Read Replies (2) of 2120
 
Rule #5: KNOW WHY YOU BOUGHT AND SELL WHEN THE REASON IS NO LONGER TRUE

This rule is probably one of the most difficult to teach as it involves EGO with each trader. It is especially difficult early on in a trade to admit the stock is heading the OPPOSITE direction you expected. I have seen student traders paralyzed to inaction when the BUYING turns into SELLING. This is especially true when you have profits in a trade, but the profits are not as great as you had hoped.

When selling starts, your INSURANCE POLICY against a fast and continual retreat down is your SELL. When the trade dips down and starts back up to a higher price (movement that I call STAIR STEPPING) 20/20 hindsight always seduces you to hold the next trade and not take early profits. Only hold through stair-stepping if you know that a HIGH PERCENTAGE of the time the type of momentum trade you are in usally stair-steps in your favor. I cannot emphasize enough; SELLING THE TRADE IS YOUR INSURANCE POLICY!.

Ken
mtrader.com
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