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It’s Not About Chasing Big Wins
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A common mistake new traders often fall into is thinking that trading is about bagging big gains.
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That’s the approach I took when I started out trading in the pits of the Chicago Board Options Exchange almost 40 years ago. I’d jump from one trade to the next, making outsized bets that had little chance of succeeding.
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No prizes for guessing how things panned out…
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I tore through my trading account multiple times over. Then I had to face the arduous task of starting again… and again.
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What I didn’t appreciate at the time was that those big wins don’t come around often. For every Nvidia, countless other stocks do practically nothing at all.
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But if you keep looking for the next Nvidia, you’ll miss other less exciting but still profitable trades.
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The way I turned things around was to stop looking for big wins. Instead, I did the opposite…
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I started treating trading as a business where I needed to bank regular gains.
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A Simple Profit-Taking Strategy: Take Regular Profits
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By taking regular profits, no matter how small, I got into the habit of trading profitably.
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Whether it was just a $200 or $300 profit to start with, wins soon accumulated into something much bigger.
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Before I knew it, I’d banked my first $1,000 winner… and I knew that I was on my way.
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Along with regularly banking profits, I refused to ride any losers. The moment a trade went against me, I exited as fast as I could.
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Whether my trade was profitable or a loser, I put a line under it and moved on to the next trade. That way, I wasn’t holding onto any profitable trades longer than I should in the hope of unrealistic gains. Nor did I hold onto losses in the hope that things might turn around.
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Instead, I got in the business of regularly making money while immediately capping any losses.
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Do this too, and it might surprise you how quickly things turn around.
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Tune in to Trading With Larry Live 
Each week, Market Wizard Larry Benedict goes live to share his thoughts on what’s impacting the markets. Whether you’re a novice or expert trader, you won’t want to miss Larry’s insights and analysis. Even better, it’s free to watch. Visit us on YouTube to catch the latest! |
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Stick to the Basics of Risk Management
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Hunting for outsized wins might suit some traders.
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The problem is that they don’t know how long it is until the next Nvidia comes along. Unless you’ve got a massive account behind you, then it’s too risky to trade that way.
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Instead, I went into the market each day with the mentality that I was going to bank whatever gains I could, even if they were small. And my account slowly but steadily began to build.
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The more profits I banked, the more I could allocate to my next trade. That helped snowball my account to something much larger.
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If you treat trading as a business – and not a casino – you too will likely see your account steadily grow.
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Remember that there are unlimited opportunities in the markets to make a profit. What’s more, those opportunities are out there every day.
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Happy Trading,
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Larry Benedict
Editor, Trading With Larry Benedict
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