Lessons from the Pros


Bigger Winners

A common mistake that novice traders and investors make is to add to their losers. I have addressed this problem before and explained why it is not a profitable strategy in the long term. However, since we cannot add to losers, what about adding to our winning trades?

In the courses at Online Trading Academy, we constantly talk about letting your profits run and in the Extended Learning Tracks we teach how to manage trades in progress. If you are in a trade that is working out, you know you were right on the direction. Why not add to your winnings at a reasonable place to capture more profits in the position? Bigger winners will allow you to have a larger cushion to cover any small losses in your trading.

So the question is: where would be the logical place to add to your winning positions? You do not want to arbitrarily add just because your position is gaining. Most of the time we may end up adding to the winner just after a fast move in our favor, only to see the prices correct and the new addition to our position starts losing.

Obviously we need a logical, low risk opportunity to add to our winners. This is similar to what we want when we enter into the position initially. We happen to teach several setups that offers low risk, high probability, and high profit potential in the Professional Trader course. These setups are perfect for adding to winning positions and are called Momentum Breakouts (MBO).

There are several MBO patterns that we identify. I have to be fair to our students and cannot describe them in detail here. However, you are looking for a certain pattern that still allows you to buy near a demand zone and sell near a supply zone.

The MBO trading opportunities are also perfect for intraday trading on days where there is a large gap and go in a stock. Many traders get frustrated when they see a stock screaming to new highs or dropping fast after a gap down without them on board. Learning the MBO strategies will give you an opportunity to trade these situations with lower risk.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.