Last week we talked about controlling trades that go against you. You can read it here but the bottom line is to get out of losing trades quickly. We did share some ideas on how to make a misleadingly easy idea more realistic to stick to.
But then what? The upside of a trade that goes against you is that it moved even farther in the direction that caused it to catch your attention. Since you now have the wisdom and complete self control to get out of a loser quickly (that’s what were telling ourselves at least) you are now looking for your next trade. Take a look at what happened next with LLY our example:
We can see the fake out that forced us to take a loss around the middle of Feb. But then last week, LLY flattened out and and is taking another shot at reversing. It is still a bit early to jump in, especially after what happened last time, but since the falling bounce that got us, it has only gained more room to potentially recover. This is not an entry sign by any means but it is a good stock to keep at the top of the watch list. With a smart option position a move to a target of 350 could easily pay for the trim we took earlier.
Emotion is a tricky part of trading. It is easy to get frustrated and stop watching a stock that tricked us. But don’t pay all of that tuition at the school of hard knocks to abandon your career. Let those mistakes become lessons and new patterns you can exploit.
Keep learning and trade wisely,
John Boyer
Editor
Market Wealth Daily
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