It’s hard to think of a job where discipline and mental stability matters more than in the job of trading.
After all, you’re in the business of making continuous financial decisions, all day and every day.
Therefore, it is extremely important to develop good habits, especially, if you’re only getting started in your trading journey – trust me, strict discipline may save you a lot of money!
Today, I want to share a great example of arguably the most important habit I developed as a trader- that of recognizing a trade isn’t working and stopping out per plan.
Let’s jump right into it.
Ben Sturgill’s WMT Trade
This past Tuesday, Ben Sturgill alerted his followers to an options trade in Walmart – WMT. Here was his reasoning and plan:
Here’s the chart of WMT, so you have better context:
Note, the options are expiring this Friday (December 31st), so the stock needed to move quickly.
Ben, in his turn, had to stay nimble and proactive if he were to follow the plan and keep the risk in check – something Ben takes very seriously.
As WMT jiggled in pre-market, it became clear that the uptrend continuation may not materialize.
And here comes the most important part – Ben didn’t “marry the stock”!
He had a plan, but the stock was not following it – Ben was ready to accept he’s wrong and cut the trade.
He didn’t try to be stubborn through and pray it all works out. He didn’t sit back, not wanting to accept a loss.
Ben acted with the discipline and the mindset of a true professional – recognize your plan is not panning out and cut the risk.
And, interestingly enough, once you get into a habit of doing the right thing, wonders happen:
That’s right, Ben was still able to close out WMT green, as the stock popped right off the open.
Avoid marrying a stock – have a plan, follow it and be ready to hit out!