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I like #4: the use of walking a log over a river to explain the reasons why most traders (including me  ) fail to let profits run, what a provoking analogy! Thanks very much. |
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It's difficult to pick and choose what are most important in this article. Whenever I've tried, I end up bolding practically the whole thing. There are few if any wasted words.
But with regard to #4, one must not overlook the following: "Stay in the trade until your target is reached, you have an exit signal, or the reason for your entry is no longer valid." In the
Zen thread, there was mention of novices wanting results
now, e.g., if they sell something short, they not only want it to drop immediately after the entry is triggered, they want it to
plummet. Even though they may intellectualize that this is unreasonable, they still freak as soon as the stock or whatever pauses, much less begins to retrace. They simply cannot wait for a wave of any length or depth against them to expend whatever energy it may have and ride the resumption of the move they traded in the first place. They admit the unwelcome thought that they really don't know what they're doing or what they're looking at and they bail.
All of which is why one must preplan every trade and be very clear about what to look for. Otherwise, one will either resort to cutting profits short, or sit there, frozen, letting a reversal signal go by unheeded while his profits turn to losses.