In the world of trading, many traders tend to let profitable positions continue, hoping to gain even more profit. However, for day traders, this habit may actually be detrimental. This article will discuss why day traders should avoid this habit.
1. Carefree Trading and Bad Habits:
- A saying in the trading world states, "Let profits run and cut losses." However, Boris Schlossberg of BK Asset Management argues that applying this saying can be disadvantageous, especially for day traders. Schlossberg emphasizes that in the speculative forex market, it's unlikely to let profitable positions continue while effectively cutting losses. This strategy is more suitable for pure luck and not for day traders relying on analysis and strategy.
2. Day Trading is Not Just About Making Money:
- According to Schlossberg, day trading is not just about making money but about not losing money. One of the most profitable steps for day traders is to quickly close profitable trading positions. Although it may sound counterintuitive, this strategy helps day traders preserve their capital and avoid larger losses.
3. Three Basic Types of Trading Positions:
- Schlossberg identifies three basic types of trading positions within the 1-30 minute time frame. First, direct profit trading; second, immediate loss trading; and third, uncertain direction trading. For day traders, the third type is the focus. Positions with uncertain directions provide freedom for day traders to make advantageous decisions.
4. Avoiding Uncertain Profits:
- In day trading, chasing uncertain profits can be detrimental. Day traders should not hold trading positions for too long and should take available profits promptly. By avoiding being fixated on a single position, day traders can capitalize on other trading opportunities and safeguard their capital from potential significant losses.
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