Clarify Cutting Losses

Cont'd discussion about website article entitled Replce Discipline

Last week’s series of blogs was about the first step in Replacing Discipline, namely Clarifying your objective. The blog dealt with how to do it. This week, I’d like to clarify the step of Clarifying by writing about some examples of Clarifying.

A frequent occurring issue for traders is failing to stop losses. Let’s clarify that. Here’s how I would apply the information I provided in last week’s blogs about Clarifying to that issue.

Who: You.

What: Stop losses by deciding on a price to which the market can move against your open position at which price you will immediately exit your open position. After deciding on the price, entering that price with your broker as an order to exit your open position if the market goes to that price.

When: Every time within 2 seconds of discovering that you have an open position by virtue of having your order to open the position filled.

Where: Place the stop loss order with your broker.

How: First, you recall the procedure for making the decision as to the number for the stop loss. Second, you apply that procedure to your open position. Third, you tap your computer keyboard to enter that number as an order to close out your open position if the market goes to that number.

Why: If the market moves adversely against your open position by going to that number, you don’t want that open position to cause you to lose even more money that it already has.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2008 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments