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Controlling Your Trades
Controlling Your Trades

Aside from having enough trading capital, discipline is actually the second greatest tool that many traders lack, as part of their trading strategy. While the tool of discipline comes from inside the actual trader, none should even consider partaking in a trade, without making sure it is front and center.
 
Discipline is what a trader will need to utilize a successful trading strategy. Whether you are trading stocks, futures, forex or options, controlling your trades is an absolute required tool. Discipline will make or break a trader.
 
Discipline will help a trader in making sure they are in control, during and after any trade is initiated. Prior to making a decision to enter any trade, first action should be the decision of number of shares/lots, amount of investment in the actual trade, stop loss to maintain and profit target for the particular trade. No trade should be made without knowing, prior to the execution of any position, the amount of loss you are prepared to take for that particular trade. Use of discipline will help a trader, determine and stick to these decisions.
 
When a trade is initiated, the trader should know they have control of the trade in order to maintain control of the entire trading process. To lose control of any step of a trade, will most likely cause a loss in the trade being made.
 
While the focus of a trade, is for the entry and exit result in a profit, a trader must realize they will experience losses. Controlling a trade should enable the trader to control the amount of loss they take. Controlling a trade enables the trader the ability to maintain a tight stop loss thus – controlling the amount of loss the trader is prepared to take. When a trader allows emotions into the mix of a trade, the trader at that time will lose control of their trade and usually, end up taking a much bigger loss than prepared for. Frequently, traders that lack discipline and trade control, become an investor, not by choice.
 
Lacking control of a trade can also, prohibit the trader from taking profits when presented, during an open position. At times traders will avoid taking profits because they are waiting for a home run. The wait, more frequent than not, will result in a trader taking less of a gain than was previously presented to them.
 
Discipline will enable a trader to set a path to take during a trade, and stick to it. Many traders plan to exit a position in blocks, versus one lump sum trade execution. Controlling a trade means the trader does not become overwhelmed with the desire to exit the entire position, resulting is less of a gain.
 
Traders should not attempt to 'practice' trading discipline while trading live. Successful trading discipline takes time. Traders should be in demo mode then, proceed to practice the method they wish to utilize while controlling their trades.
 
Controlling a trade is much more than just saying you are going to do so. Traders must put a game plan together. Prior to entering any position, if a trader becomes distracted, the trader must step away from their trading platform. For a trader to attempt to process any trade while distracted is a failure in ones trading strategy.
 
Should a trader be emotional, for whatever reason, prior to taking a position – the trader must utilize the utmost control and step away from their trading platform. At no time should a trader attempt to enter or exit any trade, while under stress. Emotional trades can be financially devastating to any traders trading capital. When emotions are in control of a trade, the trader is unable to make rash decisions. Inability to make rash decisions means failure to follow trading procedures, set up by the trader. Failing to follow procedures means, failure to control the trade. Failure to control a trade increases the ability for losses.
 
Protect your trading capital, maintain control of your emotions before, during and after, any trade is made.
 

April 2012


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