You're there, making hundreds, if not, thousands of dollars in profits and you're feeling like the luckiest man in the world. An hour later, you're back at it again trying to make more - only to see your profits get eaten away by losses. Then the unthinkable happens, you lose your profits of the day on another trade that you thought could've made you more money. What just happened? You just got PWNED!
The situation above is way too common in the trading world. It's called overtrading. What is that? It's when you didn't quit while you're ahead. Familiar with that saying, "quit while you're ahead?" That's what happens when you don't get out at the peak. What makes people not get out while they're ahead, you ask? GREED.
Overtrading is one the leading causes of trader implosions. If you go into a trade not knowing where to take profits - you're already violating the most important rule of all: No exit, no trade. Knowing how much you want to make on each trade is very crucial because it keeps your trade simple and mechanical - free of emotions.
Take the trade above for example. The entry was clear and my target as the 672 area however, we never get what we want on most days so I planned to get out should things change. In every trade I make, I always know where my exit levels are whether they make or lose me money. The problem with most traders is that they hope each trade is the 10 bagger which in reality, it never always is. You'll never get a KBIO or a VRX every time.
It's important to know how much you want to make. Say you agree to make $1,000 a day - that's $20,000 a month assuming no losses and a straight 20-day trading month. So if you've made $2200 on one day, wouldn't that already tell you you've met your goal and you should stop? This is where most people fail badly. Most people will go back and trade some more with the hope of making more. This is GREED. You should always know when you've met your target and move on. Tomorrow's always a new day.
You have ALL the control in the world when it comes to making or losing money in the world of trading. How much you make is of course up to you. How much you let the market take from you is also up to you. Most people who tell you the market is cheating them are not only lying to you but lying to themselves as well. No one else is clicking on the BUY or SELL button but you. Think about that really hard for just a second the next time you blame the markets for being manipulated. Perhaps when you are on a losing streak, you only need to look in the mirror and blame the person staring back at you.
Good luck on what really will be hell week for everyone!
Traders from Equity Sense will be writing on this blog on positions and other market-related things.