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Trader Mindset

Michael Martin is a trader and instructor. His show deals with the emotional and psychological aspects of trading and managing risk. His book "The Inner Voice of Trading" and features interviews with Michael Marcus, Bill Dunn, and Ed Seykota - who also wrote the Foreword. Get the audio book free at MartinKronicle.com.
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Now displaying: Page 1
Jan 17, 2018

When you trade with a system, you'll find that a few times a year the markets just stall right when you have a few positions on. Once this happens, it's important to remember that you have to play superior defense and protect your capital. 

Professional traders sometimes use what are referred to as "time stops" to offset risk. Here's how to do it...

If after you get long, for example, and the market stalls and there is no real movement in your position up or down over the next 2-3 days, offset the trade and go to cash. 

That might mean a range of $0.20 up or down from your entry or 1/4 point if you trade commodities. You can define what you feel your definition of the market being "flat" is.

The best trades make you money right away. From looking at my own backtests, I found that upwards of 70% of these trades that "stalled" eventually lost money. I pre-empted that from happening by offsetting them before they could get stopped for the max loss that I was willing to take on the trade. 

So, I wasn't technically making money, but I was "losing less." Either way, I had more equity in my account that had I not utilized this strategy.

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