Stock Trading

Do You Know Your #1 Job In The Market?

There are a lot of things you need to do when trading the stock market, but do you know your #1 job?

Here’s a hint — it’s not technical analysis. It’s not finding the best broker. It’s not reading through balance sheets and income statements and SEC filings.

While those things are great and can help your bottom line, your #1 job in the market is this:

DON’T LOSE MONEY.

Period. Write that down and tape it to the wall next to your computer. Memorize it. Repeat it like a mantra.

DON’T LOSE MONEY.

So how do you keep from losing money in the market? Simple. You close out losing trades as soon as they’re not working.

So when do you know a trade isn’t working?

Simple.

Let’s say this is your entry…

wres entry

You buy WRES as it breaks above resistance.

Great.

How would you know this trade isn’t working?

Simple.

Price goes down.

wres down

Right?

Would that be easy enough to see?

DON’T LOSE MONEY.

How far down price goes is up to you and your trading plan, but as far as I am concerned, it should never be more than -10%.

Another way to know if the trade isn’t working is if price goes sideways.

Like this:

wres sideways

Trust me, price going sideways can be WORSE than price going down. It’s death by a thousand tiny cuts.

So if price is going sideways, get out.

DON’T LOSE MONEY.

How long does price have to be going sideways before you get out? That’s up to you.

I use 5 bars.

Those bars could be days, hours, minutes.

So if price is doing either of those things then close and get out.

DON’T LOSE MONEY.

How easy is that?

That is your #1 job in the market and it consists of looking for two things. Price going down and price going sideways.

When you see that happening, get out.

So when do you stay in?

Simple again.

I stay in if I see this — and only this:

wres up

So do you think you can handle that?  Your #1 job?

If you can’t and you find yourself holding onto your losers a lot longer than you should, don’t despair — you will get better at this. Well, that’s not entirely true — you will get better or you will quit.

Until next time…

DON’T LOSE MONEY.

job-meme

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