 By: ShortMeTina This is purely a matter of opinion but I find it prevents you from prematurely exiting what could possibly be a winning trade. Let me explain. You see a trade and because you’re a professional trader, you do the necessary calculations (position size, profit target, stop-loss point, etc) before entering. You enter the trade and within seconds the trade goes against you. As opposed to it drifting in your desired direction; it is now moving towards your stop-loss target. You don’t give up easily so you decide to allow the trade some time to play out. It doesn’t work. The stock is acting lackluster and continues to drift in the opposite direction of what you desire. It could be frustration, fear of losing more money, lack of patience or some other reason that makes you decide to exit the trade before your stop-loss is hit. Whatever the reason, you decide to hit that button and now you're out! Good! You got out in time and saved yourself some money. You did the right thing! Or did you? The stock reverses and starts to move in your desired direction and hits your initial profit mark. What happened? Where did you go wrong? I say this with a degree of confidence. “You took yourself out of the trade, when your stop should have.” Your stop should be calculated and set to a point where you can confidently say to yourself; I am wrong on this trade. If you decide to take yourself out of a trade before that mark is hit; how can you say confidently, you were wrong? You can’t! Next time around, let your stop-loss take you out of your trade. Good, Bad or Ugly comment below Don't forget to follow ShortMeTina on Stocktwits, Twitter, Facebook and Instagram. Email us at [email protected] with any questions.
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