Precision Trading Labs believes in always using use stops. Why? Because we always have a concrete reason to get into a trade. If that trade foundation is violated, then the reason for the trade is gone. At that point we've lost control of the trade and don't know what price will do. We're then left with hoping that price will reverse & start to go our way, meanwhile our loss grows and violates our trade plan. What leads to big losses is the inability to admit when we're wrong. Being able to accept taking a small loss is the start of becoming a trader & a sign of strength.
If there's something in the chart that might reverse a trade's course after it initially goes bad after your initial setup, then that should generally have been part of the plan to begin with. For you football fans, you want to avoid yelling "Omaha" and calling audibles like Peyton Manning used to do when you're trading.
Our attitude is "HOPE IS NOT A TACTIC." Some people say fixed stops are for suckers. We respectfully submit traders who trade without a net are looking to hope when things go awry and can't admit when they're wrong. That's the the enemy of trading for a living. YMMV. Safe trading.
Many people aspire to trade, but take very different paths to get there. Some seek out a roadmap to get put on a directed path to speed and enhance their progress; others decide to go it alone and grab information from numerous sources.
Trading takes smarts, work, finding a lens to view the market and learning basic trading principles. Next is determining what to trade and a specific style. Then identifying or creating one or more trading strategies, and adopting tactics to implement the strategies.
Next is paper-trading to gain comfort with tactics, process and execution, then low position-size, real-money trading. Once you achieve a certain level of competency you can then start to create trading goals connected with personal financial objectives. Paramount throughout is risk management, proper position-sizing and emotional discipline.
Like the markets, a trader’s progression doesn't follow a straight line and it’s not without hiccups. There are light-bulb moments, setbacks and periods of despair. Virtually every trader, both those who are successful and those who aren’t, go through everything above.
But while the general things aspiring traders experience are similar, the specifics widely differ based on how they approach their education. Variables include:
As an aspiring or novice trader you should take a serious look at your development path…Make sure you’re wisely spending your tuition.
At Precision Trading Labs we deal with traders of varying experience – novices; intermediates who know a few things having mixed results; veterans at a plateau, trying to correct problems, or wishing to branch into something new. Everyone seeks “something” to do better. The key, of course, is “what's that something?”
People are often missing a critical ingredient or doing something wrong, e.g., a risk management/position-sizing issue; something with trade management; being consumed with fear or greed; not understanding the trading environment; no consideration of relative strength/weakness between specific stocks, industries and/or sectors; sector rotation; not looking at anything except the set-up chart and ignoring other timeframes; poor entry points.
Of the above, we find traders' biggest impediment is that last item, i.e., entry points, but not for the obvious, expected reason. Of course, there's no argument that the price where you enter a position is critical. But it's what people do to get there. They lack a versatile, robust trading methodology and seek out shortcuts. Entry points are the raw meat the “trading industry” puts in front of struggling traders. They lend themselves well to marketable products and unsavvy traders fall for the promise of easy profits. What could be better than “an app” that tells you what to do without having to do the heavy lifting of learning to trade?
Rudderless traders who lack a foundation and direction constantly seek out the next miracle tool or method to find profitable entry points. These things are “sexy” and directly respond to traders' lack of knowledge, insecurities and desire to fast-track their progress. New indicators that turn colors and fire off red and green triangles are marketed like treasure maps or trading “GPSs.” Indicators, oscillators, magic settings (the 9/18!, the 8/89!!, 2.1 standard deviations!!!), RSI, MACD, CCI, Bollinger Bands, moving averages, trend lines, alone and in combination.
All of the above in the right hands are potentially useful information sources. But they all require first having a defined, overarching trading approach, which PTL calls a “core trading principle.” Is your foundation rooted in support and resistance? Price-volume analysis (like in Market Profile)? Fibonaccis or pivot points that embody retracement tendencies to certain levels? Regions of price imbalance (supply and demand levels)? Breakouts based on statistical tendencies for price to move after certain candlestick formations that reflect order-flow?
Thoughtful traders who do the work to succeed:
Few traders, except those that actually make it, go through the sequence. Green traders (and those marketing to them) go right to strategies and tactics, and they are clueless why they are doing what they are told to do.
In trying to short-cut the process most traders become “serial information acquirers” as they stumble from indicator to oscillator to guru method, bobbing like a cork in the ocean. They are like unfaithful partners, running from one infatuation to the next, out the door when the next shiny, new thing comes along.
But worse than “unfaithful” trading partners are those trying to juggle and combine multiple core principles and tools. Multiple partners leads to conflict. People use their superficial understanding of support and resistance; they mix in Fibonaccis; the ADX; a momentum indicator for when price is above/below a “special” moving average; they discover the guy on the web using Renko charts that pass through the Ichimuku Cloud and is right 87% of the time; the 49/89-period moving average crossover (when the 50 & 90 just won't do).
This is all because how trading products and methods are conceived, packaged and communicated. Simply put, they aren't connected to a core trading principle. They are sold like screwdrivers and power-drills – tools that will get the job done if you know how to use them. And therein lies the problem – people don't know how to use these tools because they're disconnected from a trading foundation.
Serial information acquirers try out numerous core principles and tools, both individually and in combination, that emit conflicting information and trading conclusions. A Fib line says one thing; a pivot point another; some people think a support/resistance line becomes more reliable each time it's hit while supply and demand says it's weakened with every encounter. Again, most traders looking for the easy money don't seek out the proper knowledge in order to string together a core principle, a strategy or two tied to the principle, and the proper tactics to execute the strategy. Only then do you have a robust trading methodology.
At PTL we say, “There are literally an infinite number of ways to trade....Master one of them.” In that regard, trading is like religion, but we don't mean hoping and praying for your trade. Rather, you can't simultaneously be Christian, Jewish, Muslim, Hindu, Buddhist, etc. You gotta find religion and you need to pick a team.
In finding your trading religion, learn one core trading principle, really understand what makes it tick and find the things that feed into the principle to make it work. Learn the practical elements that will enable you to trade in the context of your life. While doing that, put blinders on. There's a zillion things out there and there's always the next hot method, cool-looking tool, and email full of inflated claims.
People are happy to sell to you. But what they're selling is a dream, not knowledge and not confidence in order to actually put your hard-earned money in play on a serious basis to:
If you're serious about learning to profit from the markets and ready to see beyond the false miracles, we would love to speak with you about taking this seriously and doing it the right way. We'll discuss how we do things at PTL and the path leading to profitable stock, ETF, futures and FX trading, as well as income generation with options, either part- or full time.
Please comment below with any questions....
And if you are ready to hear about how we can help you get on the road to profitable trading go right here: http://www.precisiontradinglabs.com/contact.html Then schedule a free one on one strategy session with us.