Traders Often Need to Be Reminded

Well over a year ago, I wrote about several of my favorite sayings that of course apply to trading. Well this is a short blog to remind everyone how important this one particular saying is to me and most likely to you. With the volatile market we have encountered over the past several months, there is no better time to remind you of this saying I like to use.

Many of you probably have heard the saying that the first rule in trading is to protect your capital. If you were anything like me when you started trading, you likely thought that the first rule is to increase your capital. Who could blame you as a new trader? But once you realize how trading works, it starts to make sense. Essentially when you think about removing risk first, profits are sure to follow if you are managing things properly. I try to ingrain this notion in my students’ heads, and it needs to come instinctively. You need to properly manage your trades and know when to remove risk, and then trading can become a whole lot easier.

It is always smart no matter what the market conditions currently are but particularly in a market like we have seen. A position is up one day and then down the next. Trust me, you do not want to always take small profits and full-size losses. You will never get ahead. That is why I like to use multiple exits for profits and losses. Remember, you are not just taking a profit or closing out for a loss, you are removing any additional risk too. That is what you really need to understand as a trader. If you do, I promise you will stand a greater chance to consistently extract money from the market for a long time.

John Kmiecik
Senior Options Instructor
Market Taker Mentoring, Inc.