Don't Be Scared When You're Making A Profit


#1

By Darrell Martin

Have you ever been profitable in a trade, but inside you can’t wait to exit because you are afraid it is going to turn on you and you are going to lose everything you have made? It is a common fear that comes because you have lost so many times before. You want to get over that fear. You need to be excited when you’re making profit and not be afraid of losing.

Risk management must be part of the reason you are able to stay in a trade, whether winning or losing and because you have accepted your risk up front. When you entered the trade, you have already said, “I’m risking $1000 to make $2000,” or “I’m risking $100 to make $200.”

If you are trading any direction and you’ve stated, “I’m going to risk this much to make this much,” but then you get out of the trade early, you are messing up your whole plan. Let’s say you had accepted that you were risking $100 to make $500 but then you get out of the trade when you were up only $100. Now, you have more than messed up your whole plan, you have broken your rules. You have to trust your trade when you put it on, let it do what it is supposed to do and accept the risk. Trading is not about being right or wrong. It is about making money and netting a profit when everything is said and done. The amount of risk is relative based on your account size.

An example of how this works was a recent iron condor trade that had a $20 risk for a $200 profit per contract. Once the button was hit to get in the trade, the risk was accepted and the trade did not have to be “babysat.” You can adopt the attitude that you just don’t care. Of course, you hope that it wins, but it is only a $20 risk. It is a great money management tool when you can just set the trade and walk away. You don’t have to worry about the trade.

If you have to babysit your trades and watch every tick, you are going to mess them up. You will probably give yourself a heart attack! It is important that once you have hit the button, you have already made all the decisions for the trade and the exit plan. If you don’t know where you are going to get out of the trade, you do not have any business getting into the trade! If you can accept the exit plan before you enter, make sure that your risk capital is expendable money and that you will be able to come back and trade tomorrow, then you will be a much better trader.

To help you overcome your fear of trading, read Trading in the Zone by Mark Douglas.

To better understand trading strategies and risk management, visit www.apexinvesting.com, a service of Darrell Martin.


#2

Very well said as usual DM, Im guilty of doing that many times, now I have learned not to stare at the $ amt


#3

Loved the part on the iron condor. Agreed with knowing your exit before entering and accepting the risk you put up once the trade is on. It’s a great tactic with these condors and have learned a lot from them.