Trading is very difficult, even more so if you trade with scared money. Trading with scared money basically means trading with money that you cannot afford to lose. If you are trading with money that you cannot afford to lose then you will lose your money. If, however, you trade with money that you do not care to lose the opposite will most likely happen: you will end up with more money that you do not care to lose. Here is a short list of how scared money will play tricks on you:
1. Scared money will have you exiting the market with a smaller than anticipated profit. One of my trading rules is to know before you enter a trade where you plan on exiting with a profit. This could be an area of resistance/support based on price or a moving average; a gap support/resistance; candle counting, percentage gain, whether or not earnings are near, etc. If you do not have a profit plan you will most likely exit the trade with a very small gain as you worry about whether or not the market will take back what little gain you have.
2. Scared money will have you exiting a trade before it has a chance to work. How many times have you entered a trade and it immediately goes against you? Did you allow your emotions to take over thus exited as quickly as you entered? Or worse yet, you entered an opposite position only to find that the trade continued to move in the direction originally planned? Just like #1 above, you must have a pre-determined exit strategy if the trade is not working. My plan revolves around the horizontal line of my crosshair. If the trade is not working, I get out but only when my understanding of “not working” has been satisfied. Losses can be just as successful as winners you know.
3. Scared money will have you staying in trades longer than necessary. Here is a scary one for you: you are in a long (call) trade and some bad news comes out, making you realize that the market can be as cold as ice. What do you do? Do you hope that the market will come back and make you whole or do you exit gracefully? My answer: GET OUT! There is no such thing as hope in the market. Hope is a bad word. JUST GET OUT! There will always be another trade and a surprising news related one just might go your way! Just don’t hope for it.
TRICK OR TREAT!
YOUR NERVES ARE FRAYED!
SO GIVE ME SOMETHING GOOD TO TRADE!
HAPPY HALLOWEEN!
