Monday, December 21, 2009

Trading "Leak": Impatience and the GS Trade

One of my mantras is to "set it and forget it" after making a trade. Once a trade is made, I set my stop and target, then forget about the trade until one of the price objectives is hit. At least I usually do . . .

My recent GS trade is a good example of a trading "leak" that many traders have, the error of impatience. GS was not a losing trade, but I could have done better. I originally entered at the bottom of the current trading range as an "oversold" setup as the stock neared support and was oversold. My initial target was hit, I took a partial profit, then moved my stop up just under the current support range. If I had stuck to it, the second half of my trade would see a profit right now.

Instead, I got tired of waiting for something to happen and exited on Friday before my stop was hit. Thus, I missed out on today's 2 percent gain.

We all must remember that we set out stops and targets for a reason, and little good comes from "micro-managing" trades.

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