In this business of trading you will often find yourself on the wrong side of a trade, knowing this, it is important to cut your losses as soon as possible.
Yesterday I entered two positions, (which I had posted on my website TradersChoice.net), Puts on HD and ORCL.
Today in early trade the price action of both HD and ORCL left me with a few choices as their price action was higher, not lower. Now keeping in mind that you will almost never get in, or out for that matter, of a particular asset at the absolute best price, you should expect that the price action will "wiggle around" a bit.
Being that the price action of both HD and ORCL both was higher, I looked at the movement of the overall market which was also higher, so I had a few decisions to make.
- Hold the positions and observe their price action.
- Hedge the positions.
- Open straddles on the positions.
- Close the positions with a minimal loss.
Each of the choices above were all viable.
I chose 4,. close the positions with a minimal loss.
Losses are an integral part of the business of trading and there is no way out of it however, knowing this, cutting those losses early on will make you a winner in the long run.
Trading is, like anything else, all about the long run. Keeping losses to a minimum, (and riding your winners), is critical to becoming a successful trader.
There are many, many ways to play your positions after you open them, and I outlined four of these in the choices I listed above. Proper money management is key to the long term success of any trader.
To learn more about money management, download my 100% totally FREE brief titled:
"The One Rule You Must Never Break When Trading Stocks." Click here: http://www.lulu.com/shop/gregory-mannarino/the-one-rule-you-must-never-break-when-trading-stocks/ebook/product-23095047.html
Gregory Mannarino
