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Risk and Biscuits

Site Administrator | July 2, 2011

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There is a saying that you've got to risk it to get the biscuit. As far as trading goes, many new traders will take on the risk but end up getting shaken out of the trade too soon. Ironically, many times this shake out occurs when the trades are actually profitable trades and results in the new trader either taking a very small profit or getting up on the trade and raising the stop too tight.  What inevitably happens is that on the next trade that does not work out, that new trader rides it down all the way to the stop loss.  This is a prime example of novice traders that are willing to risk it but never give themselves a chance to get the biscuit!

The best thing a new trader can do whether they are trading stocks, futures, options or forex is to focus on the initial trade setup and take money out of the equation.   Focus on the actual market and the plan for the trade instead of the dollars and cents.   If a trader is able to execute the plan based on their analysis, the dollars and cents will come (hopefully more dollars than cents).  Before every trade, a trader should know where to put their stop loss (where they are wrong) and where their profit target is going to be as well. Too many times, traders have a plan for when they are wrong on the trade but do not have one for when they are right.  This means that the biscuit is in sight, but they never seize on the opportunity to capture it.   As mentioned above, they will all too often take a few crumbs off the table leaving the big profits sitting there for someone else to grab.   Remember that whenever a trade is taken, there is risk and there is reward...if you are going to limit your chance at the reward there is no sense in taking the risk.

Cheers,

The TradingPub
Trade, Talk, Learn - Cheers to Success