Monday, November 19, 2012

Don't Be Early On A Trade

Disclaimer ** This blog post is being written as a supporting document for the author trade correctly**

Benefits of Waiting For Confirmation Before Trading

One issue that has plagued the trading of the account is getting into a trade too early. Not waiting for verification of the price action has caused a couple of Code Red trades for the account.

When looking for a trade, sometimes there will be possibilities that are almost ready to trade. The price is almost where it needs to be. But there is a pretty good rule out there that tells the trader to wait until the price has completely gotten to the point needed before trading. Because of greed, some traders will ignore this rule. They think that since the trade is going to a certain point anyway, why not just purchase the options now. That way, they can save money on the price of the option and, if the trade goes well, make more money than previously projected. This account is no different.

But the result on a couple of trades (UUP put trade and USO call trade) has been the exact opposite. There was resistance and support. The trades went completely  in the other direction. Had the account waited until the correct price point had been hit, the account would have saved some money.

So remember to wait for your technicals to confirm the trade. It might cost you a few dollars right away, but could end up saving you many more dollars in the future.

No comments:

Post a Comment