Trading: Evaluate Before You Pull The Trigger
Trading is not gambling or a game of chance.
In order to become a profitable trader, to be successful at it you must approach trading almost as an exact science with close to zero room for error. You need to be well educated, precise and know how to manage your emotions.
“Being in control of your own destiny is what trading is all about. It’s a constant battle, not with the market, but with your inner self, the struggle to not let your emotions dictate your decisions. Ultimately, those decisions influence how well you’re doing, and you are fully responsible for both the highs and lows.” K Ferry
A thorough understanding of price movement, market timing, support and resistance levels, timing your entry and corroboration are paramount to the success of the trade which translates into a profitable account.
In this article I will talk about the three things that I consider very important.
1. The Entry. If you are a beginner trader has it ever happened to you to be in a chat room and the moderator to call a trade and at the end of the day your trade was a loss and he /she made money on it? Well it is all about timing. Knowing the trigger point and being in sync with market momentum are essential to the success of the trade. So turning a winning trade into a loser is one of the biggest frustrations amongst traders and this is because a lot of traders find themselves missing the entry point and therefore chasing the trade. The entry is the foundation to a solid trade. Which leads us to issue numero dos:
2. Location, Location ,Location. Where you enter the trade has a lot to do with the success of the trade and it can also mean the point that can actually propel and trigger a great follow through, therefore a great reward for you that had the patience and discipline to wait for the right time at the right location.
3. Risk and Reward. Before taking the trade the trader must evaluate the risk exposure. Once the risk/trade is identified it should be measured and compared to the potential profit targets. If the profit level does not justify the risk then the trade should not be taken.
The chart below represents a trade I called in my Active Investor Signal Program that I run.
Target (TGT) short. Before taking the trade I evaluated it carefully and waited patiently for the trade to offer me an optimum entry area that would favor a fluid follow through to my projected target areas. In the example below I chose my entry under the support area. On any breach of support the price would slice right through the area therefore creating and triggering an avalanche in price which is what actually happened.
The parameters of the trades were as follows:
TGT short under $61.26, Stop above $64.00, Target 1: $60.00, Target 2: $59.50, Target 3: $58.48, Target 4: $58.00. And after the last target area we continued to trail.
One thing that it is extremely important, especially to new traders is never get out because your stocks, currency pair, ETF, e-mini, etc has reached your last target, always follow the flow and let the market take you out, never take yourself out of a trade, winner or loser, let the market do the work for you. Last lot was trailed out at $55.20.
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Learn more about Metcalf’s Active Trader Signal Program here
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