One of the biggest headaches in trading is getting stopped out of a trade to have it turn around immediately and work.
It used to bother me, but then I realized that it is the price to pay for protecting your trading capital. It’s merely the cost of risk management.
So, here are three simple ways how to decrease that painful cost:
1. Identify the correct entry.
When entering a correct pattern, make sure you’re picking the right trade. Unless you’re genuinely wrong or something catastrophic happens to the market, the overwhelming majority trades never experience a hard retest. Make sure your positions are bullish and want to trade higher. To get advice on the right entries, subscribe to VWM Private Twitter Channel.
2. Prepare your re-entry strategy.
If you get stopped out, you can always re-enter. Having a proper re-entry strategy is the most powerful way to get back into trades you missed or got stopped out.
3. You’re not missing the boat.
The problem is that you might miss out on trade even after having a good re-entry strategy. Don’t despair. If you miss the boat, you can still sail away on the next one. There will be hundreds of more great opportunities going forward.
Sounds too good? Like it can’t be that easy?
But it is.
Make no mistake. Using active risk management cost me some profitable trades.
However, according to my trading data, the strategy has doubled my long-term returns.
On top of that, it helps me sleep better at night.