Tuesday, February 9, 2010

Are you sure?

Very often we jump in a trade at the drop of the hat! The temptation is irresistible.

Very often it turns out to be an impulsive decision which results in loss or a lot of stress.

There is an easy way to avoid this.

There are 4 possible situations:-

1) When you are sure of the result and say "Yes" to the trade

= You have done the right thing and you are going great! (Don't forget to put the stop loss still.)

2) When you are sure of the result and say "No" to the trade

= You lack confidence. Timidity and Risk-aversion is not good in trading. You missed the opportunity. You should have gone ahead with the trade. What is the 'Stop Loss" for?

3) When you are NOT sure of the result and say "Yes" to the trade

= You have taken a risk. If with Stop Loss, it is OK to take such risk. Otherwise, it can be damaging.

4) When you are NOT sure of the result and say "No" to the trade

= You have done the wise thing. Sometimes, though stop loss will stop the loss to minimum but your confidence is shaken.

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