Trading: Knowing When To Hold'em And When To Fold'em. By Gregory Mannarino
In this business of trading you will often find yourself on the wrong side of a trade, knowing this, it is important to cut your losses as soon as possible.
Yesterday I entered two positions, (which I had posted on my website TradersChoice.net), Puts on HD and ORCL.
Today in early trade the price action of both HD and ORCL left me with a few choices as their price action was higher, not lower. Now keeping in mind that you will almost never get in, or out for that matter, of a particular asset at the absolute best price, you should expect that the price action will "wiggle around" a bit.
Being that the price action of both HD and ORCL both was higher, I looked at the movement of the overall market which was also higher, so I had a few decisions to make.
- Hold the positions and observe their price action.
- Hedge the positions.
- Open straddles on the positions.
- Close the positions with a minimal loss.
Each of the choices above were all viable.
I chose 4,. close the positions with a minimal loss.
Losses are an integral part of the business of trading and there is no way out of it however, knowing this, cutting those losses early on will make you a winner in the long run.
Trading is, like anything else, all about the long run. Keeping losses to a minimum, (and riding your winners), is critical to becoming a successful trader.
There are many, many ways to play your positions after you open them, and I outlined four of these in the choices I listed above. Proper money management is key to the long term success of any trader.
To learn more about money management, download my 100% totally FREE brief titled:
"The One Rule You Must Never Break When Trading Stocks." Click here: http://www.lulu.com/shop/gregory-mannarino/the-one-rule-you-must-never-break-when-trading-stocks/ebook/product-23095047.html
Gregory Mannarino
Thank you Greg!
Didn't Kenny rogers sing about the same thing, sorry about that couldn't help it . Cheers mike
Great advice. You've guidance really lessens the learning curve for the beginning/novice trader. I had to learn the hard way through many years of experience to get a good feel for it, but your picks are dead on and make the whole process much easier. I'm primarily a long term investor now, but still am active b/c of your stock picks you provide. I really appreciate all you do!
Amen to that Greg. Too bad it's easier said than done! RESTEEMED :]
When it come to trading stock I like opening short put instead of open buy spot. If the price go up I can profit from premium but if it go down then I can buy back the stock at a lower price.
THAT WAS SOUND ADVICE
I do not trade stocks, anymore, but always look forward, to your , "be your own central banker" and physical silver, advice.
You get zero points for being "right", the market does not care if you are "right". You only either make money or lose money. The biggest losses come when you hold a losing position because you know you are "right". Trades are like a bus, there will be another one coming along soon, make sure you have the fare to ride the next one.
Great analogy !!
Great lesson and words of wisdom. Thanks so much!
Tough to take those losses, no matter how small. Leading by example - well done G.