Every trader has to have a way of knowing when a trade has gone bad. Generally this is not just a matter of how much the market moves against the position. In my case I have a precise idea of where support or resistance is and try to initiate positions near these levels. After that the market should not go too far past my support or resistance or spend too much time on the wrong side of that level.
The basic way you know a trade has gone bad is to "clock" your successful trades. In other words, know the market's typical action after you have put on a profitable trade in the past. Then you will know a trade has gone bad when, after you put it on, the market deviates in some significant way from its normal action during a successful trade.
3 comments:
Goldman Sachs is buying Lehman with help from the FED! Market will rally hard on the Lehman brothers bailout!
I agree with you Carl, I have learned your method the hard way by being stopped out of great trades by a tick.
But I still place stops with every order. They are far from my exit and are used only as insurance against equipment failures or other sudden unpredictable events. Its important to cancel them after you have closed the trade otherwise you may wakeup to find you have a position on. I learned that the hard way too, lol.
Tim Mack
Hi Carl:
Could you in some future post perhaps educate us in identifying proper support/resistance levels? I can see many levels on charts, and do I use a daily chart or maybe a 30 minute?
Thx for your daily postings!
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