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Trading The Stock Market

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 26, 2020 - The RightLine Report

Notes From The Editor

Thomas Sutton, EditorStocks are on the move again. Three consecutive rally days after weeks of some of the hardest selling in history. So is now the time to buy?

Everyone knows how important it is to buy a stock at the "right" price and time. Yet when it comes down to the moment of truth, traders often have doubts about whether they should pull the trigger. This type of uncertainty causes some folks to just sit on their hands and watch the action from the sidelines. Despite a longing desire to trade stocks profitably, they can't seem to press the BUY button.

Fortunately there's a simple way to deal with this common problem.

Instead of worrying about whether the time is really "right" to get in, spend a few minutes planning what to do if it DOES turn out to be the right time, or if it DOESN'T ... once you ARE in. In other words, what will you do if the trade moves in your favor? And what will you do if the price moves in the wrong direction?

You can easily answer these questions by asking a few more. Do you plan to use an initial stop? Where will you set it? If the trade moves to your advantage, at what point will you move the stop up? If the trade moves against your position, are you willing to exit without hesitation at the pre-planned level?

Pre-planning the details of your trade management before you get into a position is much more important than finding exactly the "right" entry. But how do you get past the uncertainty at the moment of truth, that exact moment when you have to click the order button?

Luckily today's online brokerage technology allows us to implement our trading plans without having to "pull the trigger" real-time. We can now automate our entries and exits by setting the exact price to enter and exit well in advance of the actual entry. Many brokerages also allow clients to set trailing stops, so there's no reason for to worry about losing a lot of money on a bad trade.

Entering the details of a trade into your brokerage account and then letting the system take care of managing the trade is a good way to begin dealing with the uncertainty that keeps some of us from fulfilling our desires.

One final thought. Whenever you have lingering doubts about entering a well-planned trade, just reduce the number of shares in the position to a bare minimum. This will compensate for any over-sensitivity to risk. In time your confidence will go up as you gain experience and accumulate profits.

Trade well,

- Thomas Sutton, Editor

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