The markets continue to drift upwards but there have been several breakouts stalling too over the past week as profit-taking sets in.
That’s a sharp reminder of the importance of sticking to my 4-step trade plan, in particular protecting your profits early (P1).
This is arguably the toughest part of the trading process …
Think about it … You’ve just identified a wonderful setup … You place your trade to enter at the breakout … It breaks out … The excitement builds up! It keeps going for a bit … You’re nicely in profit, but this is such a great setup this is going to the home-run isn’t it (you tell yourself!). Yeah! Let’s hold off on that P1 for now … this is going race through (you tell yourself!!) …
And so it passes the P1 threshold and now you’re counting your millions, right?! You’re an amazing trader, this is easy isn’t it?!
But then the stock stalls … What?! What’s going on? Hmmm, it’ll bounce back … except that it retraces some more. Should’ve taken something off the table but it’s such a great setup I’m sure it’ll come back! I’m staying in …
I’ll spare you how that continues … either in disaster or in a lucky break!
Either way it’s bad trade management.
Good trade management is getting to first base quickly and protecting a decent profit. If you trade multiple shares or contracts you can combine P1 with P2. If you’re only trading single contracts then take the P1 and find more great setups. If they’re not there, wait patiently. Compounding small profits works … it’s how people 10x their accounts in 18 months, so don’t turn your nose up at taking small profits.
The beauty about our OVI method is that our hit rates to P1 are high, so good setups are rarely too far away.
So, I beg of you to take this lesson super seriously. In my years of trading it’s probably the toughest part of the entire process because it messes with our psychology.
But one of the reasons people don’t protect their profits early is because they inherently don’t feel they are trading with any kind of advantage. So they cling on for dear life to the one that looks like it could be the home-run!
With OVI Trading strategies we see our hit rates to reasonable P1 levels are so high that we can take the view of compounding those smaller, more easily achievable profits over and over again.
This week will see further improvements released for the TradeFinders, so please look out for a webinar invite. The webinar will be on Thursday and I will also officially release the OVI Home Hedge Fund.
This was an interesting project because I was going to release it back in February along with the main fund project that we did release at that time. The problem was that it would be nigh-on impossible for a home-based trader to execute it for various reasons including size, number of shares, and complexity of portfolio rebalancing, even in the case of the simplified version we had created.
Then we had the server migration that was essential for various reasons including security, speed and future-proofing our new technology.
But I’m happy with what’s happening with it and we will continue to make improvements as we do with everything as a part of our culture.
This week’s review has more gems among a selection of interesting charts that are highly educational in terms of do’s and don’ts!