Successful traders know that a market can only move so far in 1 minute that a market can move further in !a href="http://www.5minutetrader.com">5 minutes, even more in 60 minutes and a heck of a lot more in a day or a week. Losing traders want to trade in a very short time frame and thus automatically limit their profit potential.
By definition, they have limited their profits and kept an unlimited loss scenario. It is no wonder so many have done so poorly at this of short-term trading. They have boxed themselves into a no-win situation under the guise, often promoted by brokers or system sellers. That money can be made calling market highs and lows during the day. The merit is bolstered with the seemingly rational statement that by trading within just one day and never holding anything overnight. You cannot be exposed to news or major changes; thus you limit your risk. That's flat-out wrong, for two reasons.
First, your risk is under your control. The only control we have in this business is to set a stop-loss point, a level at which we exit the trade, all trades. Yes, a market could gap beyond your stop the following morning, but that is a rare experience, and even then we are still able to limit our loss with our stop-loss and absolute willingness to get out of losing trades. Losers hold on to losses, winners don't.
Once you establish a position with stops, you can only lose about that much money. No matter when or how you got into the trade, your stop limits your risk. Your risk is the same if you buy at an all-time new market high, or low.
Not holding overnight limits the amount of time your investment has to grow. While sometimes the market will open against you, if we are on the right track even more of the time the market will open in our favor.
No comments:
Post a Comment