Cutting losses quickly is super important if you are trading very large position sizes, however when your trading a small trade size via a portfolio method, there can be times when you can add to your trade intelligently, this will not work all the time, but i have found it to be a reliable way of covering losing trades under the right conditions, obviously if your over-leveraged, you need to cut your losers quickly regardless.
Short term trading setups look for:
1. Support and resistance
2. Daily Pivot Levels
3. Reward to risk of 2:1 Minimum.
What are Fibonacci Expansions?
Fibonacci Expansions are price levels created by tracing the primary move (sometime called the impulse move) and its retracement.
The resulting levels are drawn on the chart in an area that would normally be difficult to estimate support and resistance using ordinary charting tools.
This makes Fibonacci Expansion especially useful for picking profit targets when trading trends.
When faced with an upward trending stock or currency pair, there are going to be times when price moves counter to the overall trend. Once this counter move or retracement is exhausted, price resumes back in the direction of the primary trend and will often break new highs.
It is at that moment, that Fibonacci Expansion tool can be used.
While the Fibonacci Retracements are used to determine how far the price might originally retrace, Fibonacci Expansions can help us determine where price might head after the retracement is exhausted
Highlighted below are a primary move followed by a retracement move.
You simply need to plot three points using the expansion tool
All these lines can be interpreted as resistance levels as the price moves higher, making them perfect areas to place profit targets.
You can see in this example that price quickly hit the 1st profit target before consolidating, and then later broke upwards towards the 2nd profit target before retracing lower. It hit each of these prices, bang on! Before price regrouped for its next move.
This gave us some nice exits for this recent trade closing out at the 1.618 level (I’m only closing this here as there is a high sloping resistance line on the long term daily chart that will be very hard for price to penetrate)
You could use these to scale out of trades using multiple targets this is a pretty good money management strategy which lets you to lock in profits as the position moves in your favour. This should help smooth out your overall returns (and emotions) on a trade by trade basis.
Yes...I believe sometimes you can just want a trade too much, so much that you begin to ignore that voice little of intuition that tells you its not going to work and begin to rationalize that it will.
Anything can trigger it, not enough sleep, feeling the need for control, not wanting to be wrong again after a string of losses, trading too big, being hungry, a hot streak etc.
The key to avoiding this is following your rules, and to be SELF-Aware of your mental and emotional state at all times. If you feel yourself wanting to deviate from your predetermined plan after you have placed your initial trade or you start looking for reasons as to why your trade has moved in a certain direction you need to be careful as when this happens your rational judgement is going.. going... gone...!
It can even cloud the judgement of seasoned traders and if you feel it coming on you may as well close up shop for the day and save your account anymore damage, because you are no longer trading with your best interest at heart
Watch this video and dont make the same costly mistakes.
Four successful traders talk about their mistakes and the art making serious money trading at the 6th Penny stocking conference in Las Vegas. You can see the full conference here highly reccomended for all traders.
The simple answer is...yes you can!
But you may need to change your perspective about what that means. Think of your life like a business, what do business's die without....cashflow!
Having traded for a living for a number of years now you quickly learn that while you can make large sums of money by position trading, the downside is it can take a lot of time...and in the meantime your bills keep coming and you still need to eat etc.
This was a lesson that was lost on me the first time I attempted to trade full time for a living, well that and having high overheads. There was a small 27 page ebook my friend Rob Booker wrote called Forex Strategy 10: Low Risk/High Return Currency Trading. When I read this the first time I was "attempting" to trade for a living, truthful I foolishly dismissed its message.
I was too attached to the idea that massive profits that would bulk up my bank account. Today I think massive profits are the exception not the norm...cashflow is king, you need to ring the register daily, the low stress compound growth eclipses that of one or two massive stressful gains that may only happen once every two or three months.
Hear my thoughts on this while I'm waiting for a small trade on the $EURJPY to pan out.