Protecting Profits

Submitted by Marco on 7 May, 2006 - 21:42

You're in the green - you're actually making money on the stockmarkets. But you are simply breaking even... why? Because you are simply returning your profits back into the markets. A part of trading successfully is managing risk and consequently preserving and protecting your profits. You must trade with a plan - a part of that plan being an exit plan... a stop loss plan, a plan that tells you when to get out when your initial technical analysis that signaled an entry point fails. That is the time to execute your exit plan - if the trade goes sour.

To trade successfully, you will need to learn how to preserve and protect your profits.

The loser trader would simply hold on, changing their technical analysis, blinded by fear and greed: the fear of losing money as well as the greed for that lost money. Of course, when you go changing your view, while you are in a losing trade you are simply fooling yourself. You want to be always right. You are the best trader! You were on a winning streak! You are always correct... sure, but not now.

The lesson here is to act in a business-like manner when executing your trades. Having a business plan that tells you when to enter and exit your stock trades. Being a man when the time comes, cutting your losses - and preserving and protecting your profits for the long run.