Upstart Holdings, Inc.Education
PATTERNS & PITFALLS #1
The market is designed to make you fall into traps, and make you doing things. By nature, we tend to overcomplicate things and trading is one of them. As in coding, the best way to code is to Keep It Simple Stupid (kiss).
One of this thing is what i call “The Home Runs Chaser”. A large majority of retail traders, slowly tendto look everyday for a stock heading up to the moon. Why does this happen? How we slowly enter into that thinking process when we start trading?
So you start trading for few days or few weeks, you see a stock on an uptrend and you go long, take money and then you see the stock going up fast after you exited, what do you tell yourself?
“Damn it, i should have held it a little longer, if only...”
And then it happens a few more times, and BINGO you’re in it, you’re in the trap designed by the stock market:
- You start looking everyday for home runs.
- Now you have the “win or loss” mentality
So you allow yourself to lose it. You see gains but you’re focusing on the holy grail, the holy target!
LOOKING FOR HOME RUNS WILL LEAD YOU TO NOT GETTING PAID !!!
Plus it will frustrates you a lot because most of the time, you won’t have the home run.
=> We must enter the right way of course, as usual, BUT BUT BUT, we must take quick wins when it’s on our side.
=> Sometimes we have low wins when the stocks have low momentums and sometimes big wins if they are big.
But at every trade: you should take partial profits along the way.
Exemple: you enter long in stock XYZ at 20$ with 100 shares. Your target is 22$. Instead of waiting the price to reach 22$ to sell your 100 shares, what you should do is to take partial profits. So at $20.49 you sell 25 shares, then at $20.99 you sell again 25 shares. If it goes over 21$ then you wait for the price to reach 21.30 to sell again 25 shares BUT if the price goes back to 20.50, just sell 25 shares to secure a bigger win. The remaining of the 25 shares are sold at ~ $21.97 in the case it goes up, or sold
at ~ $20.20 if the price drops.
That’s how you secure a win and not let the trade goes against you.....
And if you have to leave your computer, just use the trailing stop with an ok spread between the price and the stop just not to be stopped too quick if the price moves down a bit before going up.
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