We all may look back on our trades to see where we should have taken profits, but many traders let opportunities fly by only to take a fraction of their potential wins just before they melt back to their entry price.
The problem may not be so troubling if it was as simple as taking profits at highs, but it's not because traders don't want to take profits at the highs , but BECAUSE they DO. You see when a price is rising, often traders think it will keep rising. It may and it may not, of course, as we all know, but in the heat the markets it all looks good from "here" until it reverses and then, traders think it will, of course, reverse again. Therefore, the slide back to entry.
OK then, what is the cure. Well, for one sticking to your plan is important. Know your target and goals and be sure to take your profits into the direction of the trade. But I can't help but think that most traders know that. What most traders don't know is the subtle effect of watching a price rise (or fall, if short) it's hypnotic effect and therefore the lulling into a secure feeling that "it", the trend, won't change.
So the best way to avoid such a hypnotic state is to 1., Set your stop and 1., set your target. Then, use the best alert system out there. Not one that sends you emails but one that will ring your bell and won't stop until you pay attention. By setting an alert for yourself, you can relax into knowing that you will be able to adjust your profit taking along the way as need be, without paying attention to each hypnotic tick. Then, once your target is reached, be sure to take at least part of your profits to the bank.
Finding a way to cash in your winnings is as important as setting your stops to avoid losses. It takes discipline to do both, but the reward is sweeter when you get better at reaping your winnings.
Happy Trading, Living and Dancing
Anni
The Daily Pick - ANR
©DayTrading with Anni 2010 All Rights Reserved
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