By: The T3Live Team
Recently, a reader commented that he got “crushed” in several of our trade ideas that did not work. We appreciate the feedback and we thought this would be an opportunity to highlight some important points on position management. The best of traders are only successful at best, on 55% of their trades. It’s impossible to bat 1000. Anyone who claims otherwise should be viewed with extreme caution (see: Lenny Dykstra).
We use technical analysis at T3 Live not with the intention of finding sure-fire trades. Our goal is to identify inflection points in stocks that create potentially profitable if-then scenarios. If we are correct about the importance of the inflection point, the risk-to-reward scenario should be favorable. We fully admit that we will often be wrong, which makes position management an essential ingredient in our trading. We seek to maximize the gains on our winning trades and limit the risk on our losers. With that in mind, we seek favorable risk/reward setups but we also use a tiering system to enter our positions.
When a position hits our initial stop loss, we are never in more than 1 tier of the trade. We do not haphazardly buy and sell stocks. It is a rules-based process. Managing a trade requires exceptional discipline and a developed feel for the market action. Once we have confirmation that a trade is working for us, only then will we add an additional tier to the position. Our trade ideas are not necessarily about being right or wrong, they are about providing good risk/reward setups that when right, provide far greater reward than loss when wrong.
When we make a trade suggestion, we lay ourselves out there. It is important to understand the method we use in executing on these setups. Everyday on T3Live.com you can see the full portfolio and hear narration of each and every trade executed by our top traders to learn in real-time how our traders manage positions.
