Three reasons why newer traders get killed and never break out to become profitable traders. The first one is they don’t use protective stops. They think, well, this can’t possibly happen to me. What’s the worst that could happen? Then they get blasted back to the stone ages. As soon as you get your fill put in your protective stop, you’ll thank me for it later. Your gains are only going to look like gains to the extent that you keep your losers small.
Speaking of taking winners, that’s number two. Why people never get big – green on the screen, as soon as the thing goes green, they start taking winners too quickly. It’s a hair trigger response. Do you have a hair trigger response in other areas of your life? Make it last baby. Stay with your winners for as long as possible. It’s the only way you’re going to make real money.
You’re going to make money much less frequently than you’re going to lose, so you might as well let your winners run. Get comfortable with the feelings that you have to feel while you’re in your winners. They’re not going to disappear, evaporate overnight.
Third reason why people get killed is their position sizing and is all over the place. You can’t bring your bias to trade because you love Bitcoin here or you love SMCI over here. You need to trade with a consistent bet size, and that shouldn’t be a number of shares or some tier stuff. You should use a fixed percentage of your capital. This way, your objective, because every trade represents, for example, one half of 1% or 1%. Whatever you’re comfortable with, keep it consistent, right? This is going to help you get consistent results, and that’s what you’re aiming for when you’re just starting.
Now, how do you fix this stuff. Well enter your protective stops as soon as possible. As soon as you get filled. No one wants to get stopped, but trust me, I’ve seen I trade commodity futures. I’ve seen markets run away against you very, very quickly. Put in your protective stops. You can complain when you’re in cash. Don’t sit there in disbelief when you’re getting blasted. Have your protective stop. Know what that is before you put the damn trade on and enter it as soon as you get filled. One thing that can help you with this too is don’t look at your P&L. Let the market go where it’s going to go. Taking winners, look to trade the reversal at the end of the move. The market will tell you when the move is over. Don’t think in terms of price targets. You don’t know enough to calculate price targets one. Two, human beings suck at prediction despite what they think they know, and three, use consistent bet sizes. It’s the quickest way to get consistent results.