Today's Quote: “Few things are brought to a successful issue by impetuous desire, but most by calm and prudent forethought.” Napoleon Bonaparte.

Having your stock reach its intended targets is something with which you will never feel very comfortable. If you decide to take an easy target, so you don’t turn a ‘winner’ into a ‘loser’, and the stock goes so far past your target you feel like a loser anyhow. The next time you let the stock ‘run’, only to stop out for a loss, and THEN see you target achieved.

There are always areas on the chart we can find to set targets. Setting targets has been a topic of previous articles and lessons. However, for many traders, targets often are not the problem. It is the management of the trade. A trader may set a target that works, but then they are not in the trade long enough. Is this true for you? Do you know for a fact? Here is an easy way to find out.

When we train someone who has a track record, one of the issues we will usually want to know is how they are managing their trades. Usually, the answer is so ‘vague’ that we look into the next question. What are their average winning dollar amounts compared to their average losing dollar amounts? Often this is a key number for traders. If this is a problem, we have them do a simple test on their past trades.

We go back and see how every trade would have played out had they had ‘no’ management policy. That means, let the stock hit the original target, or the original stop, with NO interference. Just as if you were gone for the day of for the month. We call this ‘all or nothing’. Then they should compare the results of what they actually did, to this new ‘mythical’ number. The number can easily be found on all your past trades as long as you still have a record of their original stops and targets. This may be one of the most revealing tests you can do.

Now, before you start wondering, ‘why do I need trade management then?', understand this. We are NOT necessarily saying that ‘all or nothing’ is the best management technique. What we are saying is, what if you are NOT beating it? Many new traders do not have a disciplined style of management and this leads to poor trading. If you cannot beat the ‘hands off’ approach of ‘all or nothing’, why are you putting yourself through all that pain?

The nice thing is that this will usually lead to a compromise, and form a style that is the best of both worlds. One where the stock is given a fair chance to hit its target, but managed as the target becomes very close to being achieved. See how it works for you.