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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade
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To: Gary Korn who wrote (1636)11/19/1998 5:21:00 PM
From: Ken Wolff  Read Replies (3) of 2120
 
I'd like to talk a bit about stops:

I often make this point to my traders: A trader's ability to keep a stop loss is the focal point for his percentages per trade.

For example, if one averages 10 good trades and 10 bad trades. i.e. 50% trading success) and his average gains are 1/2 while the average loss is 1/4, he will make on average 1/4 pt per trade. His average income is the amount of shares per trade minus expenses.

To be successful as a daytrader, one MUST achieve a level of COMFORT!!! The way to be comfortable in such an emotional business is to keep a fairly close stop! One must react to potential losses with comfort and resolve.

I have noticed the normal action of amateurs is to blow a stop loss and then sell at the exact bottom taking the maximum loss possible. Everyone has done it. The reason is the emotions force a sell as a stock downticks and you are seeing a big loss in your mind. Your emotions will eventually tell you: "I don't care, I just want to end this pain!"...Usually that is the time to buy...

But the point is: One's ability to keep a stop loss will be the focal point for his percentages per trade. As a daytrader, your income is really tied to your ability to accept losses.

Ken
www.mtrader.com
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