Today's Quote: “Determination is the wake-up call to the human will." - Anthony (Tony) Robbins.

Last week, right here in the introductory section of this letter, we finished the discussion regarding targets. As you may have guessed, next we will be talking about the topic that is inseparable from targets. It is the topic of trade management. This is a huge topic for most traders. The reason it is such a big topic is that many errors can lie in your management policies and go undiscovered for a long time - even forever.

Think about the consequences if you simply don’t follow your stops. You will soon have a big loser and it will hurt. You are immediately and keenly aware of the problem. Whether or not you fix the problem may be another issue.

Now think about your targets. The difference is that when you ‘mismanage’ getting to a target, you may still have a profit. So you don’t have any immediate pain. As a matter of fact, you may never have pain. So it goes unnoticed. It is like the difference between being shot by a gun or having a long term illness. You are keenly aware of the gunshot wound and get help. You may never be aware of the long term illness. Yet both can kill you.

Traders don’t care about the management as long as the trade makes money. They feel that the expression, ‘you can’t go broke taking a profit’ is a good one to live by. It is NOT a true saying. It is one that can kill your account. So we need to talk about how to manage trades. This will include discussions about Sharpe ratios, batting averages, all or nothing trading, trail stop methods, and much more.

In the beginning traders have problems because they usually don’t follow any plan and don’t play any real strategies and don’t really follow stops. Those that survive the initial problems overcome these issues but often fall into a time where they feel GOOD about their trading, but they are stuck at ‘break even’ forever. If this is you, trade management is likely your issue whether you know it or not.