If you don’t take profits, eventually the market will take them for you, and then some.
Most traders have their Come-to-Jesus moment after they’ve taken a series of devastating losses.
They realize if they don’t make a change, their account will be wiped out and their dream of becoming a self-sufficient trader is gone.
So they implement a risk management plan, including stops to keep losses small.
And while that isn’t a bad thing…it creates a problem on the other end…
They start to take profits as quickly as their screen flashes green, to avoid the pain of losing.
Maybe this sounds like you…
You’re in a position in a stock that’s trending up, has good volume, and you see that you’re up $50 or $100 on your position — you’re like, “I’m out!” I’m taking it!
You apply the same thought process to your goals as you do to stops.
If that sounds familiar, don’t feel bad. Everyone goes through this phase — I was there too.
So how do you fix it?
I have a simple solution I’ll share with you today, so you can start letting your winners run…
How to Let Your Winners Run
Most new traders do the opposite of what they should do. They stay in losing trades because they don’t want to take a loss. But then they take profits and exit their winners too soon.
Today, I’m going to help you turn that problem around…
It’s called channel trading.
You use key areas of support and resistance to continually manage your position. Here’s how it works…
Oracle levels show you the technical levels to trade between.
For simplicity, let’s say you buy at $1 and the next Oracle levels are at $1.25 and $1.50.
So you watch for the stock to break that key level. Once it’s above $1.25 you want it to hold that level.
As long as the stock stays above $1.25 you stay in the trade.
If it collapses below that level, it’s a failed breakout and you get out and take your gains.
But if it continues to trade between $1.25 and $1.50 you hold. You sit on your hands and wait. Because it hasn’t broken down and failed, and it hasn’t broken the next level of resistance. So there’s nothing for you to do.
If the stock breaks above the next resistance level at $1.50, you do the same thing…
You hold it as long as the stock holds that new breakout level.
If it breaks below the breakout level, you get out and take your profits.
And the Oracle levels will change and the range between them will increase because of the Fibonacci sequence they’re based on. So the next level might be at $2 and then $2.50.
You can keep holding your position as long as the stock continues higher and breaks through key levels. If it breaks down, you still take profits and can move on to the next trade.
Try it next time you’re in a winning trade.
If you want to learn more about how Oracle works and how to use the levels — join me or one of the other StocksToTrade traders in a live webinar. Click here to register.
If you want to know more about letting winners run, I covered this lesson in my Facebook LIVE session on Wednesday. Click here to watch the replay.
If you’re not a member yet, answer all the membership questions to gain access here.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade