As of 07/10/2020
  Indus: 26,075 +369.21 +1.4%  
  Trans: 9,312 +172.05 +1.9%  
  Utils: 791 +17.12 +2.2%  
  Nasdaq: 10,617 +69.69 +0.7%  
  S&P 500: 3,185 +32.99 +1.0%  
YTD
-8.6%  
-14.6%  
-10.0%  
 +18.3%  
-1.4%  
  Targets    Overview: 06/30/2020  
  Down arrow24,000 or 27,800 by 07/15/2020
  Down arrow8,400 or 10,000 by 07/15/2020
  Up arrow825 or 700 by 07/15/2020
  Up arrow10,800 or 10,000 by 08/01/2020
  Down arrow2,900 or 3,300 by 07/15/2020
CPI (updated daily): Arrows on 7/10/20
As of 07/10/2020
  Indus: 26,075 +369.21 +1.4%  
  Trans: 9,312 +172.05 +1.9%  
  Utils: 791 +17.12 +2.2%  
  Nasdaq: 10,617 +69.69 +0.7%  
  S&P 500: 3,185 +32.99 +1.0%  
YTD
-8.6%  
-14.6%  
-10.0%  
 +18.3%  
-1.4%  
  Targets    Overview: 06/30/2020  
  Down arrow24,000 or 27,800 by 07/15/2020
  Down arrow8,400 or 10,000 by 07/15/2020
  Up arrow825 or 700 by 07/15/2020
  Up arrow10,800 or 10,000 by 08/01/2020
  Down arrow2,900 or 3,300 by 07/15/2020
CPI (updated daily): Arrows on 7/10/20

Bulkowski on Trading Hesitation

 

I received an email from a beginning trader who asked, "Why can't I sell on time?" If a position went well, he would ride the wave upward and sell when he thought price had peaked. But when it dropped, he stood unmoving like a deer in headlights. I gave him the following suggestions.

Did the novice trader take my suggestions? No, and now he is down almost 50% on two more trades. Instead of swing trading them, he has switched to buy and hold, waiting and hoping for them to come back.

Trading Hesitation: Psychology

Let's take a closer look as to why traders hesitate pulling the trigger (placing a trade).

I remember reading somewhere that rats, given the choice between food and pleasure would starve themselves to feel good. Traders are no different. They may also be rats, but that's not my point. If you associate trading with losses (pain), you will be reluctant to jump into a trade. Too many wins (pleasure) and you feel as if you can't lose, so you tend to take riskier trades. The secret to successful trading is to balance the two.

Consider the trades you made last year or last week. If you followed your methodology, would you have more money or less? Instead of having big losers, if you used a stop on those trades, would you have saved more money?

If you hesitate placing a trade or enter late, then you may be letting the pain of loss color your instincts. Imagine the trade turning into the biggest winner this year. Think positively. Recognize that you will not win every time, so each loss if just the cost of doing business. If you get a trading signal, imagine acting on it and winning. Repeat creating the image of placing a trade and then winning. Doing so will help put fear in its place. It will still be there cautioning you, but it should not be a wall you cannot scale.

On the exit side, the idea is the same. When you get a signal to exit, take it. Imagine that you are cutting your loss. Imaging how you would feel if you continued to hold the stock and price were to drop in half. If this is a profitable trade, imagine that you are getting out at the very peak with price then tumbling downhill.

Think about how your portfolio will grow if you continue to execute according to plan. Then imagine how you would feel if you ignore your rules and see losses pile up.

You can also try affirmations. "I will trade according to plan." "I will use a stop on every trade." "When I get a trading signal, I will take it." Repeat your favorite mantra every day for three weeks and your subconscious will accept it as a truth. You will become happier and perhaps more successful.

Successful trading is all in your head (well, not really, but it sounds good. It helps if you know what you're doing). Solve your hesitation problems by imaging that each trade will be a winner and each losing trade will remain so small as to be insignificant.

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Trading Hesitation: Closing Position

Here is a short list of additional solutions.

Pulling the trigger at the right time can be as easy as that or as difficult as you want to make it.

This article was based on an idea from a "Trading Hesitation" article by Roosevelt in Technical Analysis of Stocks and Commodities magazine, September 1994.

-- Thomas Bulkowski

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See Also

 

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My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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