It doesn’t matter… you can be the world’s greatest stock-picker
But if you don’t know how to manage a trade then it won’t do you any good…
Proper trade management goes beyond the basic mantra: let winners run and cut your losers short.
Through experience and mentorship, you’ll learn that you have specific tools at your disposal.
For example, stock traders will use stop orders to ensure they are closed out of a long position if the stock price drops below a certain level.
The stop is there to protect you from further damage.
However, when you are trading options—setting stop orders is not as efficient.
That’s why I’m going to be spending this Saturday with you talking about stops. This lesson is essential if you’re currently: unprofitable or break-even.
Follow the steps I lay out, and it will jump you ahead of the pack— and on the path to becoming a consistently profitable trader.
Problem – No stop loss
Tell me if this sounds familiar. You find yourself in a losing trade, and you have no idea how you got there. Worse yet, you don’t know what to do.
Everyone wants to start earning money day one, trade one. It’s just not that simple. You can’t take a few lessons at a driving range and then compete in a golf tournament. Both of these things take practice.
Newer traders jump into entries without any idea of where they plan to exit the trade, either at a stop or a target. A lot of that stems from an incomplete strategy. And every strategy needs a foundation rooted in stop order management.
Solution – Write down your stops and send these orders in immediately after you enter a trade
Before you click the mouse, you should be able to list out your target and your stop. These should be precise, unambiguous levels.
Note: It is ok to use percentage losses if that works with your strategy. However, these still have exact price levels!
Here is a chart I used for a Weekly Money Multiplier Members trade:
See how I listed out my stops and targets before I entered the trade? You should be able to write it out clearly as if you were sending an email to your subscribers.
Here is a trick that will help you limit your losses. Enter your stop orders immediately after you enter your trade. I’m talking about within a minute. Get it into the system and leave it. Do not touch it.
It takes more discipline than a Shaolin Monk to watch your stop hit. Trust me…you need to accept the pain. This saves you money in the long run and mental anguish.
The Breakeven Trader
Problem – Stops get hit, and the stock takes off
This problem caused me to snap a few pencils. I would be in a trade, and my stop got hit. It happens, no big deal. But then the stock would take off immediately after…or maybe an hour later
Did they know my stop was there? Did they intentionally hit it?
Actually, they probably did. Big money traders work markets every day to trip stop orders. It may seem unfair. But it’s not illegal, and it’s common.
The market, especially the intraday trading, isn’t designed for small retail investors like you and me. It’s meant for big money to operate. So if we want to hang around, we need to play by their rules.
Solution – Use candle closes
I want to highlight my notes from the Weekly Money Multiplier chart.
Candle closes help you avoid getting whipped out of trades prematurely. Intraday action can go all over the place. But, it takes a lot more money to move stock for an entire day (and that holds especially true for weekly closes).
Rather than set your trades as immediate stops, use candle closes to exit trades. The time-frame you use should match your setup time-frame. If you want to be extra sure, use a double candle close below the level.
The Profitable Trader
Problem – A stock moves massively past your stop, causing excessive losses
Sometimes the market moves violently. It comes from a tweet, a data point, or just out of nowhere. It sends everything into a tailspin. Or maybe it’s just stock-specific news that blows your stock up overnight.
Whatever the case, it can and will happen. It’s just a matter of time. These don’t occur often. But when they do, it can devastate your trade, wiping out days, weeks if not an entire month of gains.
Even with the best advice, you will always have this risk. But, you can minimize the chances and impact of it occurring.
Solution – Adjust your stops with stock or market conditions
You want to consider three factors for adjusting your stops: market, sector, and stock conditions.
Imagine you have two $30 stocks with the exact same setup. Why would you want to make one stop wider than the other?
If one stock has higher volatility (IE moves more on average), it makes sense to assume it might push past your stop more than the other.
Similarly, when the market is moving around like a tornado, you can expect that the market will trade past your stops more than if it were a quiet Friday afternoon.
Work on your trading at every level
As a guru trader at Raging Bull, I take my member’s concerns seriously. Their experience is what matters most. I regularly solicit feedback to understand their obstacles, turning these into plans that get them to the next step.
I want to help them become profitable traders, no matter their skill level. And it’s something I want to offer you.