Expert trader know-how shared by MegaTraders. Do you want to raise your game? Then read on...
The old adage is keep your losses small and let your profits run.
With good money management you can still beat the odds. For example let's suppose the average amount of your winners is $3,000 and the average amount of your losers is $1,000. If you only had 40% (4/10) winners you could still make alot of money. Example:
4 x $3,000 = $12,000 (40% winners)
6 x $-1,000 = $-6,000 (60% losers)
Thus, in this example for 10 trades you would have made $12,000 - $6,000 = $6,000.
Troy says: "Making money matters more than being right". Most traders fail to achieve this because they never bother to create trade exit rules and have no idea when, how or why to exit a trade.
Stop Raiding for bull markets:
Stop Raiding for bear markets:
Note 1: Sometimes the market continues trend for a few days more in order to raid stops before turning around.
Note 2: Stops are like a magnet. The markets gyrate towards and through stops. Traders are often taught to place stops on old highs and old lows. This is usually the worst place. Thus, any strategy using stops should avoid placement of a stop at a price that is likely the stop is hit.
Troy says: "Buy low, sell high".
Never double up or triple up as this is bad money management. Even if you are holding a winning position you may not be able to cope psychologically with even minor market gyrations and spook yourself out of a very good position.
Averaging a loser (buying more at a lower price or selling more at a higher price) may sound great on paper, but in practice it is very uncomfortable to trade and you may once again be spooked out, selling the bottom or buying the top.
However, phase lead indicators can give several signals before a top or bottom is in place. Thus, I am a firm believer to proceed with caution and enter with half a position followed by another half position if you get a subsequent signal (providing it still remains within acceptable risk parameters). By trading under-geared stress levels will be reduced significantly. If the market doesn't provide a second signal you should still feel satisfied to participate in a winning trade. By only having a half position you should have kept capital aside to take trades in other markets too. However, you will need a relatively large account size to be able to do this.
Troy says: "Doubling up can triple your losses".
Here are some examples of how to trade a losing position. Let's assume you are holding a losing position:
These are some of the strategies a trader is faced with. The choice is yours:
High risk - market could continue to move against your position so running up big losses (or wipe you out)
Helps preserve capital No position means not participating in any potential big move Helps preserve capital Allows you to participate in any potential big move Could be whipsawed Re-entry price is rarely good Helps preserve capital Stops are for takingNote: As always be vigilant and observe for instances of stops being raided. Patience is needed to ensure a good position (albeit taking heat) is not closed out prematurely at a humiliating price.
Fibonacci plus support and resistance levels are very important when considering price targets for profit taking.
Imagine the Seasonal trend is a bull, you have just gone long at a Primary Cycle low and the market moves in your favour. We can expect most of the following events to occur:
When few of these occur, we can expect the Seasonal trend may be changing from bull to bear.
Imagine the Seasonal trend is a bear, you have just gone long at a Primary Cycle low and the market moves in your favour. We can expect most of the following events to occur:
When few of these occur, we can expect the Seasonal trend may be changing from bear to bull. Thus, at the bottom of the Seasonal Cycle you can expect a long trade to be very profitable if you let the profits accumulate.
Imagine the Seasonal trend is a bear, you have just gone short at a Primary Cycle high and the market moves in your favour. We can expect most of the following events to occur:
When few of these occur, we can expect the Seasonal trend may be changing from bear to bull.
Imagine the Seasonal trend is a bull, you have just gone short at a Primary Cycle high and the market moves in your favour. We can expect most of the following events to occur:
When few of these occur, we can expect the Seasonal trend may be changing from bull to bear. Thus, at the top of the Seasonal Cycle you can expect a short trade to be very profitable if you let the profits accumulate.
Remember: Buy low, sell high.
Still don't have a clue when Primary Cycle highs and lows occur?
