To: chowder who wrote (11693 ) 3/23/2007 7:34:08 PM From: chowder Read Replies (1) | Respond to FOOD FOR THOUGHT ... A Wall Street Master .................Trade with the plan. Stick to it. Every rationale, target, stop, and scenario should be thought out before the trade is entered. As Vic says, "confusion is your biggest enemy". The biggest thing you need to consider is your intended timeframe for the trade. If you know how long you want to hold the trade, the goals, stops, and volatility allowances will be easier to establish. But the bottom line is, plan your trade before you enter it.The Trend Is Your Friend - Trade With The Trend. It's great to catch a reversal, but it's even more difficult. At least when taking a position with the market rather than against it, you can get off on the right foot. It all may change the next day, but you'll have at least a day's worth of cushion/gain. Taking a contrary position and praying for a reversal rarely works out well enough to make it worth doing. Let Profits Run. Cut Losses Short. The second one (cut losses short) is the tougher part of this rule. It involves admitting that you were wrong. But in trading, rare is the case where you will eventually be proven right after being proven wrong. It's just not worth trying. If you struggle to cut losses short, you can counter-act that psychological devastation by letting your profits run (once your target is hit), and then telling yourself that not only were you right, you were REALLY right, in that your target exit point was surpassed and you made a little more than originally planned. To do this, keep ratcheting up your stop-loss with each incremental gain above your original target. Don't Trade Off Of 'Tips'. A tip is rarely more than opinion, and frequently a bad one at that. Even if the tip comes from a friend, don't take it. If you have a hard time with this, go back to rule # 2 - the trend is your friend. Burn this into your head! Unfortunately, in trading, a friend is not always a friend. Never Trade If Your Success Depends On A Good Execution. If getting a fill that is not currently marketable is critical, you may want to go back to rule # 1 and make sure you're trading your plan. Great trade set-ups will always be great, even if you have to pay a little more to actually get into the trade. If you (or your broker) have to fight hard to get filled at a certain price, that's the market's way of telling you that this trade will not be an easy one to make profitable.
