The main thing I like about this strategy is that there is no emotion involved. If the stock I buy goes down, I don't start sweating, and start thinking if I should sell it or hold on. I keep it if stays above the 50dma, and sell it if it closes below.
What most traders do not realize is how much investment psychology plays apart in being successful at trading. This strategy will hopefully keep your emotions in check, since you have made out the rules ahead of time.
I am currently reading a book called, "Trading in the Zone." This book is about the psychological aspects of trading. In this book, the author, Mark Douglas, says that:
"Learning how to redefine your trading activities in a way that allows you to completely accept the risk is the key to thinking like a successful trader."
In terms of this strategy, this means looking at the stock, and saying to yourself, "Will I be able to accept the loss if the stock in question falls to below the 50dma." If you can accept the risk, then this strategy will become a lot less emotional, and much more systematic, which is what we want. We don't want fear or greed to apart of our trading.
Now, without further ado, here is example number 4:
This stock is obviously in a massive uptrend, but I would not buy at this level. The amount of distance between the current price and the 50dma is too great. In other words, I wouldn't be able to follow the rules, and be able to accept the risk. This means that I would wait patiently for this stock to come down to perhaps the 20dma, and then pick up some shares.
Hope that makes sense. Thanks for stopping by.
In terms of this strategy, this means looking at the stock, and saying to yourself, "Will I be able to accept the loss if the stock in question falls to below the 50dma." If you can accept the risk, then this strategy will become a lot less emotional, and much more systematic, which is what we want. We don't want fear or greed to apart of our trading.
Now, without further ado, here is example number 4:
This stock is obviously in a massive uptrend, but I would not buy at this level. The amount of distance between the current price and the 50dma is too great. In other words, I wouldn't be able to follow the rules, and be able to accept the risk. This means that I would wait patiently for this stock to come down to perhaps the 20dma, and then pick up some shares.
Hope that makes sense. Thanks for stopping by.
No comments:
Post a Comment