This is more of a trading psychology issueâ When the market moves against a new position, how do you reconcile selling back out to cut losses short when the reasons for entering are still intact? Iâve been caught a few times opening a new position and hanging onto losses a little too long. How did you all overcome the problem when you started? If I am going to correct this, what should I be thinking about? Thanks!
Money management. Specifically using stops. Hard stops are best for beginning traders. A hard stop is setting up a predefined stop as soon as you enter a trade and leaving the stop alone until it executes (loss) or you cancel it when profit target is reached.
I agree with the last poster. When entering you should have a good idea of support/resistance levels, as well as the current trend. When you open set a stop at a level or two below entry. This will force you out with minor losses, thus preserving the majority of your capital. I have been trading for around a year and a half and when I began I decided where I wanted out, both positive and negative, before I bought. I tried trailing stops for awhile, but I have regressed back to this method, as it seems to contain my greedy side. When you find what works, stick with it. If you modify your strategy, do it slowly.