STOP-LOSS

-
Arguably one of the most important and also painful lessons I've learned is the psychology during losing trades versus winning trades and how critical it is to use a stop-loss in order to limit a loss.

A stop-loss is a price you set prior to initiating a trade and if your trade hits that price you are OUT. Here is an example:
  • Entry Price: $10.00
  • Exit Price "Stop-Gain": $10.70
  • Stop-Loss: $9.30
Interestingly, I almost always hit my "stop-gain" points. Like clockwork, I eagerly sell wins at or near my target exit price when I am winning (in the above example, I'd sell at $10.70 in a heartbeat). But for some reason, selling losses is another story - I sometimes hold them forever to avoid taking the loss! In the above example, the price could get down to $9.00 and I'd think to myself "well, I might as well hold it, how much worse can it get?" or "I don't want to sell it now because as soon as I sell it it is going to rebound and I'll miss out!". I'd basically keep talking myself into holding it hoping for the rebound.

I love to compete and I fight hard to win and I HATE to lose. This is potentially a recipe for financial disaster if you are not able to remain humble and not trust even your best preparation. The saying "stay humble or get humbled" is so true. Condition yourself to feel good about the trade win or lose. Set your stop-loss with each entry point and maintain the discipline to exit when your stop-loss is triggered and live to fight another day.

Trading Tide Levels:
  • Mid Tide (S&P hit a Low Tide of 2801 on May 13, 2019 coming off a High Tide of 2954 on May 1, 2019)
  • Moving toward Neap Tide (VIX hit a high of 23.38 on May 9, 2019 and was at 16.84 at the time of this post)
Subscribe to 10KT Newsletter          Learn More About 10KT
Facebook
Twitter

This is for informational purposes only and the information provided does not encompass all possible or probable outcomes and nothing posted here is an indication of future results. Nothing in this blog is a guarantee or promise of future investment returns and investing in stocks or bonds carries risks including losing your entire investment. I do not recommend, advocate or endorse any third-party links, resources or advertisements of any kind. Any investment decisions are recommended to be in conjunction with a Certified Financial Planner, a comprehensive and personal financial plan and all other components that make up your own financial situation.

Popular posts from this blog

Create Watch Lists

-
Creating Watch Lists in whatever brokerage account you are using and selecting the " boats " (stock symbols) to include in your Watch Lists are the first steps in  Fleet Management . AVOID LOSING YOUR ENTIRE INVESTMENT! Stay diversified by investing in a fleet of stocks rather than risk everything on one stock. That is why Watch Lists are important so you can observe and study stocks from various industries at the same time. Here's an example Watch List created in TD Ameritrade > My Account > Create a new watch list > Add symbol(s) > Name and Save Your Watch List Example: AAPL, AMZN, CAT, $VIX.X, F, GOOGL, KHC, MU, STLD, T, USB Here's another Watch List example: FXAIX, RFHTX, VIGIX, VIIIX And another: AAPL, AMD, AMZN, BABA, BBBY, BRK.B, BX, BXS, C, CAT, CRM, CSCO,  CTL, DE, DELL, DIS, DKGN, F, FB, FDX, GE, GM, GOOGL, GSS, GT, GTN, HD, JBLU,  JCI, JD, JNJ, KHC, LOW, LSI, LUV, MA, MAT, MGM, MRVL, MSFT, MU, NKE, NVDA, ORCL, PFPT, RAD, RNG, SANM, SBUX, SCHW,
Read more

$CAT Dividend Declaration

-
I have two boats launched  $CAT I  and  $CAT II  and that can earn  dividends  as  today $CAT declared a divided  of $1.03 for shareholders of record at the close of business October 21, 2019. October 18, 2019 is the  Ex-Dividend date  and consequentially the  $CAT  stock price will be adjusted by the exchange around $1.03 lower overnight to reflect the $1.03 worth of value that will be removed from the stock in order to pay the upcoming  dividend . Will this declaration influence my sailing? Depends on where the  Tide  is between now and then. If the stock is dropping, I probably still have to execute a STOP LOSS  regardless of the upcoming  dividend . The $1.03  dividend  is payable on November 20, 2019. Fair winds and following seas! Trading Tide Levels : Mid Tide  ( S&P  at 2915) Spring Tide  ( VIX  is around 19) Subscribe to 10KT Newsletter            Learn More About 10KT Facebook Twitter This is for informational purposes only and the information provided
Read more

Conditional Trade Orders

-
Are you sure you want to deal with the emotions associated with the risk of losing your money? Do you have the right mindset to make sure trading is enjoyable? A great tool to help manage  emotions  is the use of "conditional orders". A conditional order is an order that uses predetermined criteria to trigger an action. Here's an example of a "conditional order" that executed today: If the bid of $STLD is greater or equal to $30.49, sell  $STLD  at limit $30.50. This "conditional order" was created on Monday, September 14 and it triggered on Tuesday, September 15. There are a couple of things I like about this strategy: You don't have to openly "advertise" your plans to the public. You may already be wondering why not just place a sell order for  $STLD  at limit of $30.50? I prefer not to "show my hand" until I am ready to play my hand and I also like the power of putting some thought into the if/then conditions. Conditional
Read more