Hold onto Winning Trades or Should You Bail?
This is the single biggest thing that will probably turn your trading around. It's not the strategy, its not how to have a better entry point like most people think - but from everything I've seen helping educate traders - it all has to do with how you deal with the card you were dealt. Specifically, knowing when to bail on trade. There is a very black and white answer to this, now let me show you how and why, and 5 reasons how this matters.
The Rules for Bailing on a Trade and Not Holding onto Winners
Take this trade I'm in... symbol, time frame, none of this matters for what i'm going to show you. Although just for fun, if you think you know the instrument type it in the comments. I'll give you a clue, its a tick chart.
Anyways, I've found myself in this trade which is an ETP-2 pattern. For those that do not know, its a fibonacci based pattern that is measured using both price and time and tells you vital information that other fib type patterns do not - such as how much time this trade has to reverse before you should bail on it.
2 Rules when you can bail on a trade and how to do it. Rule 1: If price is within the red zone and you're in profit even just a little, you would bail on your trade by moving your stops to breakeven. High chance you'll be stopped out, we expect that, this is how we're bailing on the trade, by breakeven. Rule 2 If your not profitable, you let the pattern continue, fully expecting that it could be a loss, but you let it play out in hopes you get to that breakeven point.
Now what i want to show you is when not to bail on a trade, and this is going to be a game changer. after you see price going up and you move your stops up to breakeven as we did just now, your not going to bail on the trade. ever. full stop. period. it doesn't matter if price starts heading back down to your entry point. you never tell yourself, well i'm going to make sure i walk away with what i have because you think its going to stop you out ... so while we watch what happens in this example, lets talk about 5 reasons why you don't want to bail on the trade your in and why its the death of your trading career ...
Reasons Why You Should Not Bail On A Trade?
#1 Opportunity CostWhen you exit prematurely, you potentially miss out on the opportunity to profit from future price movements. your already at breakeven this is like having a free ticket to the lottery, just enjoy the ride.
#2 Emotional DiscipleExisting a trade too early is usually a cause of emotional trade which can lead to further impulsive decisions. don't do that .. your feeding the deamons inside of you and its just going to make things worse.. .lol
#3 Loss MitigationExisting a trade too early can also mean that you take a loss that could have turned around. by staying in the trade you give yourself a chance to recover and potentially turn it into a profitable trade, plus you already got a stoploss at breakeven.
#4 Learning OpportunitySticking with the trade that is not performing as YOU think might turn out to be a great learning opportunity and allow you to build in some new consistent habits
#5 Consistency...Consistency is a key in trade and by sticking to your plan and not bailing on trades, you can build a track record of consistent performance which can help your confidences and ultimately lead to long term success.
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