Stock market commentary, analysis, insight and opinion of the RightLine Editors is available every Tuesday/Thursday evening & Saturday
afternoon. The following is excerpted from the:
March 4, 2021 - The RightLine Report
Notes From The Editor
Here are four simple guidelines you can benefit from regardless of the time frame you choose to trade and invest in.
1) Be sure of your time horizon.
Most people buy stocks without first considering how long they will own them. Are your plans short-term or long-term? It makes a big difference. Although history shows that the market generally goes up in the long run, it doesn't reveal what's just ahead.
2) Don't rely solely on the clock or calendar.
While this may sound odd at first, choosing our time horizon has as much to do with price movement as it does clock or calendar time. A trader who specializes in trading 15-minute bars has an idea of how much the price should move within that "time" frame. The actual amount of time in a "normal" trade of this type can be anywhere from 15-minutes to several hours, or on some occasions even a few days.
However, an experienced trader would never expect this type of trade to go on for weeks or months. He or she is always aware of the normal price movement that can be expected during the average trade time period, and doesn't plan on being in the trade indefinitely.
The same reasoning holds true for any chosen time frame, whether we are trading one-minute bars or monthly charts. Profit is the only part of the trading clock with cash value, so when making trade management decisions always consider your earnings too.
3) Get Control of the Risk Factor.
No matter how well we trade, sometimes we're going to be wrong. Despite all of the hype to the contrary, most successful traders win only about half of their trades. Using intelligent risk management tactics insures that losses won't hurt us.
4) Use Your Emotional Intelligence.
We've got to play the hand we're dealt, even when we don't like it. The stock market is much bigger than any one of us. We have no control over what it does, but we do have complete control over how we respond to it. Getting angry when the market goes down doesn't make it go back up, but the emotional stress of anger has the potential to cloud our judgment.
- Thomas Sutton, Editor
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