Approaching the stock market always with the same set of rules allows you to remove what we believe to be one of the fundamental problems with traders which is their desire to want to second guess the price direction. Eliminating this desire will help you become a more consistent trader and can be key to your success in trading the stock market.
You often hear us referring to risk to reward and how we wait for all of our analysis to come to us rather than forcing trades on with bad risk to reward. Our risk to reward money management profiling helps us identify whether a trade is even worth taking. Trading is a numbers game and you want that number to be in your favour when trading your hard earned money.
Stock Market Update
Understanding when to take profit and when to let your winner run is a topic every trader loves talking about. Many traders would love you to think they buy the low of the low and get out at the high of the high but this is rarely the case and if it does happen, more often than not, it is associated with luck. We as traders have to be aware that 99.9% of the time we leave money on the table and by using technical analysis as exemplified below you will be able to see what I mean.
If you look at a 3 min chart and mark on your entry and exit, then go to an hourly chart and do the same analysis marking on your entry and exit you will see that:
Your entry and exits are different
Your risk to reward is different
Your end result is different = profit / Loss
By trading the higher time frames you will eradicate market noise and swings in price but the money management profile will be a lot different.
If you have any questions relating to this Market Update or wish for us to talk about a trading subject that you're interested in, please don't hesitate to contact us.