Avoiding Impulse Trades -- By: Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
Last weekend, the Newsletter article began with the following paragraph:
"When we trade we need to make many decisions. What stock will I
choose? What strategy will I use? When will I enter? Am I bullish or
bearish? What is my exit strategy? Will I set a stop to buy? Will I
set a stop loss once I have entered? What reward to risk do I seek to
attain with the trade? Will I bother to create a trading plan? These
are just a few of the decisions we must make as traders."
I then went on to explain how important I believe it is to make
decisions and how difficult it is for so many to make those decisions
themselves. Somehow, at least one subscriber interpreted the article
to suggest that I was advocating making trades on impulse. Exactly
the opposite is true and I thought I better write this weekend's
article to clarify my thoughts just in case any other subscribers may
have reached the same mistaken conclusions.
Each of the elements in the quoted paragraph require a decision.
We specifically should decide what stock we choose, if any. Part of
that specific decision will be based upon whether we are bullish or
bearish. If we are bearish, for example, we may just decide to stay
in cash or choose an ETF (Exchange Traded Fund) or option strategy to
play the downside. We then would want to decide on an entry point and
an exit strategy. After all, the trade is not over until the exit and
that exit strategy, in my view, needs to incorporate both a way to cut
losses and a way to let profits run. These are decisions that should
be made in advance of entry into any trade. We may then decide to
implement the decision using a stop loss order or a trailing stop loss
or an alert that is sent us once a specific price is reached. Deciding
on a specific minimum reward to risk ratio before ever making a trade
can make the difference between being a winner overall or a loser.
Anyone who has read my book, "Trade Your Way to Wealth" , has
seen that my philosophy is definitely NOT to trade on impulse, but
rather to create a plan that is specific to each individual trader or
investor. In the book, I set out elements I believe should be
incorporated into each traders plan and discuss how a trader might
decide to implement those specific elements. Trading without a plan is
often the equivalent of trading by impulse and sets the trader or
investor up for failure. So there is no mistake and in order to be
crystal clear, I absolutely believe a trading plan is essential.
Creation of a plan requires that the investor make decisions and it is
that decision making process that I discussed last weekend. The
decisions should not be made on impulse, but rather with careful
consideration, but they should be made. Again, as I discuss in my
book, I believe all trading decisions should be made out of the heat
of battle and at a time when emotions are not ruling the decision
making process. Only in that way, I would suggest, can we avoid making
trades on impulse.
Good Trading!
Bill Kraft
Success Trading Group -- by the Success Trading Group Team
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or PDA alerts intended to provide you with the opportunity to make many, many profitable trades.
Here is a play from the Success Trading Group:
Alcoa, Inc. (AA)
Our Success Trading Group members scored two more winning trades this week
including a trade on Alcoa (Ticker: AA). We have many of our "old
favorites" on our radar and look forward to trading next week.
Have a great weekend and we'll trade next week.
Success Trading Group Team
Trade Quality
Stocks Over and Over Again
Over 320 winning trades and only 9 losses!
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Option Trader -- by Bill Kraft
Our Option Trading Service is for conservative traders that understand leverage principles and enjoy the challenge of options trading. We focus on powerful option trading strategies that place volatility and momentum in your favor. And we pride ourselves on always minimizing our losses!
The Option Trader service utilizes standard trading in Puts and Calls as well as strategies using Leaps, Straddles, Credit Spreads, Calendar Spreads, and Naked Puts. But no matter how sophisticated a strategy may be, we ALWAYS know our downside potential on every trade.
Here's a look at a trade Bill is currently working on:
NetApp, Inc. (NTAP)
I'm looking at the Jan 2011 $12.50 LEAPS calls on a
retracement to the uptrend line that began in November. It looks like
they may be available somewhere around $6 if the stock does dip back
near $14. I am waiting for a dip followed by a turn back up before
deciding.
Good Trading!
Bill Kraft
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Trend Trader -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Here's a look at a trade Bill is currently working on:
Steel Dynamics Inc. (STLD)
Steel Dynamics has been trading in a range since December
and broke above resistance on Friday on slightly above average volume.
MACD turned positive around the beginning of the week. It looks as
though this one has a target in the $20 range if it can hold above the
resistance it just broke.
Good Trading!
Bill Kraft
Try our Trend Trader Real-Time Alert Service
and Get $50 off our Normal Website Rate!
$10 Trader -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Here's a look at a trade Bill is currently working on:
Skyworks Solutions Inc. (SWKS)
$10 Trader had another winner this week with SWKS. The
stock is now on a rocket ride and I am awaiting a retracement before
considering entry. Ideally, a move back to the new support around $6
with a turn back up might do the trick for me.
Good Trading!
Bill Kraft
Try our Under $10 Trader Real-Time Alert Service!
Dividend Investor -- by the Dividend Investor Team
Our Dividend Investor service focuses solely on the "best of the best" dividend paying stocks. We attempt to buy these stocks for their powerful dividend producing income; and we will also buy these with a purpose to make capital gains as the stock increases in value. Our Dividend Investor service is a perfect fit for an IRA account.
Here is a play from the Dividend Investor Team:
ConocoPhillips (COP)
Our Dividend Investor members closed a "trade" position this week for
another win. We traded in and out of ConocoPhillips (Ticker: COP) for a
quick gain in less than 4 days.
Have a great weekend and we'll trade next week.
Dividend Investor Team
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and Get $50 off our Normal Website Rate
