One Reason You May Have a Fear of Taking a Position?
By Cliff Clark
I've had many traders tell me that they're afraid to take a position and that it's hard for them to pinpoint the causes of this fear. Indeed the causes can be many, but usually it stems from the simple fact that they don't understand what day trading is really all about. When I ask these traders what trading is, the typical answer is: "the buying and selling of stocks in order to make a profit". Well yeah, that is correct, but it's pretty simplistic and it doesn't tell the whole story. What about losses? Shouldn't they be part of the definition? It is losses after all that will drive most people out of trading.
A better definition is that trading is looking for quality setups that under the right conditions
have a high probability of producing a directional move. Trading as many of these quality setups as possible, looking to have more winners than losers while maximizing the gains of the winning trades and minimizing the losses of the losing trades.
Building a trading plan that allows you to trade as many of these quality setups as possible is a requirement of professional trading. During the building and testing phase of your plan you'll learn to accept losses as part of trading. Once you understand that losses are part of trading and you accept that you are going to have losses from time to time the fear of taking a position should fade away.
I know I seem to talk a lot about having a quality trading plan, but this along with a pre-trade checklist and a trade tracking spreadsheet are the things that are going to make you successful. They will help you build confidence and discipline in yourself. Once you have confidence and discipline there is no stopping you!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
