Saturday, November 03, 2012

Are You Fit To Trade

Are you fit to trade?

ABC bought a stock at $1. He placed a stop-loss at 95 cents. The stock dropped to 96 cents. He said, " I will give the stock a little more room". He moved his stop-loss to 90 cents. He has breached his discipline; he is not fit to trade.

To be a successful trader, you must have ironclad discipline. Once you set your stop-loss at 95 cents, what does that mean? Does it mean you should place your sell order at 95 cents? In my opinion, it is not. It means that as soon as a trade is done at 95 cents, you should sell at the next bid. This next bid could be at 95 cents or lower, maybe 94.5 or 94. You must not delay; you must sell it immediately.

Ask yourself, can you do this? If you can't, you are not fit to trade.