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Once you set a specific goal for the year, you must ask how you are going to meet it.

By Anthony Green
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Once you set a specific goal for the year, you must ask how you are going to meet it. How many trades at what size would you have to make in order to make your number? What should your team look like? What general rules must you establish in terms of holding on, doubling up, or getting out of positions?

If you reply with a shrug, "Well, I want to do as well as I can," you are less likely to get there. To reach your target, you'll have to elevate your game to a level where you say, Okay, this is what I'm going to do.

Why have rules?

Because some moves, which you can find in your own database, consistently work. Forget the standard litany of rationalizations.You can always blame Alan Greenspan, or the market, or the fact that it's February. But regardless of different styles, certain principles remain immutable. If a stock goes down and you own it, you're losing money. "I'm going to make it a long-term trade," you say? You still lost money today. It's a six-month trade or a three-month trade?

Maybe. But today you were hoping and wishing; you read something in Barron's, but it doesn't appen. You may keep thinking that you can make up for the loss, but, in fact, you would make much more if your losses were less.

Once you stop having too great a tolerance for a high level of loss, you can start raising your monthly profit and loss significantly. Some traders, even substantial ones, stay in positions even if they're dropping, because they are "macho" and can tolerate pain. The stock will eventually come back, they tell themselves. But you are not a wimp if you get out of a losing position. One trader I know had to learn to get out at three points.

Next he learned to get out at one and a half, and he made more money. Now he has to take the next big step: learning that it's okay to run away from a losing stock. So if he's making four thousand dollars and he starts cutting his losses, he can make five or six thousand.Losses are always hidden in your P&L. It looks like you're making some money, even though if you look closely you lost a lot of money, and that costs slippage and opportunity as well. Start looking at how much people are not making because they're scalping on the way up.

Let's say a trader scalps sells for a quick profitand makes $5 million. Maybe if he didn't scalp, he could make $10 million. The issue is tracking where the stocks go after you get out. What if you're ahead at the end of a day, and you say, The hell with it, I did well. Why should I look? Hindsight, you argue, is twenty-twenty. You're right. But I think game films to see what they are doing, so as to improve the way they win.

Granted, the best thing would be to be right there at the time. I'm merely trying to make you aware of your thoughts, in order to give you a chance to change your thinking. Go ahead: Resist this idea. Argue that when you're in the middle of a loss, you're thinking about how to limit it, or how to get some back. Argue that you're as good as your next trade, not that you're as good as your last trade. If your past behavior has been successful, you ought to repeat it. If it's not successful, you won't repeat it. Articles on http://www.2stocktrading.com">stock market trading, finance, http://www.2stocktrading.com">investing tips and many more http://www.2stocktrading.com">stock trading related information. If you want to make money out of this visit http://www.2stocktrading.com.

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