I tried to dwell on this point in the post, but Im not sure it came across well: a good trader, upon puking a stock at the lows only to see it turn around, might buy it back if his initial thesis was still sound. .
Obviously, many traders run out of actual money to trade with and then do stupid things like fund their trading accounts on credit, this is simply lunacy and will dig you a financial grave faster than you can imagine.
You cant take the pain anymore, so you cut the position loose.
The cliff notes are that with the momentum strategy, you get whipsawed a lot more (stopped out of a lot more trades but you have fat game texas holdem poker java positive tails on your online casino free bonus no deposit 2017 trade returns. .JCP, and, given the price action, was finally thinking about capitulating on his bearish outlook (which itself was a capitulation on his stock of the year call, but well get to that in a minute). .These big moves take time to play out and many, many amateur traders will be betting against that trend the whole way up or down, thinking it will end at every swing.Often, the market is setting you up to fail, so dont bet big on a trade thats giving you that over-confident feeling because those are the most dangerous ones.I didnt want to make the post a top to bottom chronicle of how great a contrarian indicator Herb Greenberg has been in JCP this year because as I noted, the point is positively not to mock Herb its to illustrate this clearly documented graphical.Dont ever do this.Remember, you need to survive, that is the only goal here, not profits (yet but capital preservation at all costs.Stick to your pre-defined risk parameters and when you see a quality trade setup that meets your trading plan, enter it with conviction.
Blowing through money in the early days of trading also leads many traders to simply give up citing trading is too hard or impossible before they actually know what theyre doing.
As discussed in my recent article on why you need wider stop losses ; you can trade wide stops or tight stops, and still risk the same amount of money, it just comes down to position size.
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Herbs comment helps me clarify my message in this post: when youre trading real money, emotion naturally comes into play. .
Thank you for your support.Theres FAR more money to be made trading with the trend when everyone else thinks The market cant possibly keep moving in that direction than there is trying to pick tops and bottoms.Last week, I noticed some wild intraday action in JC Penney (.I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.Change the contracts / lots traded and the dollar risk changes, its that simple.So if you look at the timestamp of Herbs tweet, and you look at the intraday chart, youll notice the very definition of max pain also known as capitulation. .We have no control over the content of these websites.Im not going to tell you how much to risk per trade, or what of your account to trade, because its not my place do so due to the many complicated factors involved.
The stock had a rocky road: JCP YTD, herbs first max pain call was his capitulation on this long trade, which, almost perfectly, marked the bottom for JCP thus far this year.
Changing gears again, and stepping back into the JCP time machine: We need to step back in time a bit and look at the the full Herb-JCP picture, because theres even more max pain involved.
A bad trader, however, whines about how unlucky he was, how the HFT Algos forced him to do it, how markets are manipulated, or any one of another armful of excuses.