50S EDUCATION FILM WMV

This rule controls the AMOUNT you can lose on any one trade. I like to use about 1/2 of the stock daily movement for my stop loss amount. For example, if a stock price moves on average, say $1 every trading day, then I'll back off 1/2 of that, or 50 cents and place my stop loss there, limiting the losses possibly incurred on that trade. Whatever you use, be FAITHFUL in adhering to the protection afforded by the stop. In other words, DON'T CHANGE IT. If you're stopped, you're stopped. He who trades and runs away lives to trade another day!

So much for minimizing the NUMBER and dollar amount of losses. Equally important is allowing your profits to maximize AT THE SAME TIME! Here's how to do that.

RULE 3. When you become profitable in a trade, replace the stop loss with a TRAILING stop, trailing by that amount of profit.

This one is so important that I believe it should be the 22nd amendment to our Constitution! Say you're up 25 cents in a trade and you have your stop loss in at 50 cents below your entry (on long positions). Replace the stop loss with a 25 cent trailing stop. At THIS point, you WORST CASE outcome for the trade is BREAKEVEN (give or take a couple of pennies)!!! In my live trading lab on my website, I often refer to this as the MAGIC point in the trade. You have virtually NOTHING to lose and EVERYTHING to gain from that point on!

Finally, for the 'do-it-yourself- traders ...

• RULE 4. Leave the trade alone from this point on!
• The market overall will do a much better job of managing the trade (with the above rules observed) than you or I EVER could! Once you've reached the MAGIC POINT in your trade, just go away and do something else. Your trade is on autopilot!
• I'm glad to have been able to spend the last few minutes sharing this with you. I hope it helps you to trade more profitably!!

Bob with Better Trades.

• Do You Want Increased Profits? Then Go After Decreased Losses!
• Hello, this is Bob Eldridge and I'd like to share with you a frequently overlooked source of profits from your trading. It's a simple concept yet so very important if you expect to be able to continue trading for any length of time! The concept is that of controlling both the number of losses you have and the dollar amount of those losses. I realize that statement sounds so obvious that you might be tempted to put this article away in favor of a night of bad television, but please stick with me here. I'll share some things with you that you probably don't expect to find here!