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Don't Give Back Profits

Aug 1, 2008
To maintain a healthy bottom line, traders must learn not to give back profits. After racking up a very healthy trading portfolio, many traders get the idea that they are infallible and every trade will come as easy as the last. After gaining some experience, nothing should motivate traders as much as a trading plan that monitors trading structure, while helping the trader follow through only with quality trades.

Following through with a plan

To avoid a dip in account balance, the active, professional trader knows that following a trading plan is the ultimate way to succeed. Having trading discipline is the key to growing your portfolio. While the market and its variables change minute by minute, trading plans offer plenty of consistency that any trader can fall back on while keeping active in the market. Proven techniques and strategies produce profits consistently by involving traders in only quality trades - those that can be won more than they are lost.

Quality not quantity

One of the few suggestions for holding your own while trading is to make only quality trades and refuse to chase returns. Traders get sucked up into the idea of trading religiously, whether making good trades or bad, and start giving back their excellent returns because they stray away from a plan.

Making a large number of irresponsible trades will not produce any profits; rather, it will slowly drain an account balance because of the strain that many trades put on an account. A comprehensive trading plan should include enough room to make many trades, but limit them to only the most profitable of the bunch. Why be a 70% trader when you can obtain 90% accuracy?

Have some reasoning

Behind every trade should be a motive, whether in the form of technical analysis in support and resistance lines or fundamental trading ideas and news releases. A customized plan should include rationale for each trade, as well as reasons not to trade. For example, your trading plan might be best for trading opening gaps, rather than trading the stale, midday market.

Know yourself

The most important part to any trader is the part that knows yourself. Before trading, every trader should grow accustomed to their own trading plan and their own personal goals. Remember, every single trader has a different market personality, as well as varying risk-to-reward tolerances.

Realize that you cannot enter the market recklessly and expect life-changing results or financial freedom. These two goals are incompatible, as trading violently actually limits profits instead of producing them. A trader just needs to stick to a cohesive, thoughtful trading plan, and the rest of it will fall in behind. A little common sense and a conservative approach pay off in the end.
About the Author
Leroy Rushing is an active, professional day trader; trading coach; and author. He is the Founder and CEO of Trading EveryDay, a provider of educational trading products and services that are available worldwide. Trading EveryDay has complimentary/FREE products, a Tools of the Trade eBook and a Trading Room Report , that are downloadable for your convenience.
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