We’ve all been in trades which were treating us well, moving along in the anticipated direction as we giggled to ourselves about what we might spend the profits on….only to get slapped in the face when we get too greedy and stay too long after the move exhausts itself. It’s called wearing out your welcome, and it’s very tough on us as traders. It can easily lead to a loss of confidence, causing you to become timid with subsequent trades which you should be aggressive with. The fear of giving back gains again causes micro-management of trades, as a lack of trust begins to replace that winning swagger you once had.
Profits are the aim of our trading efforts, so it’s vital to recognize when the time comes to ring the register and pay ourselves.
Wearing out your welcome applies to a lot of arenas, so making a habit not to do it in other areas of your life can help to establish some better trading habits. For example, I was a professional golfer for a few years right out of college. A local country club allowed me access to their facility as a courtesy as long as I didn’t overstay my welcome. If they were hosting a tournament or it was a busy day with lots of members around, I slipped away and found another place to practice. Had I stayed too long, they likely would have asked me to leave, which would have been costly to me. As a result of my respect for them, we had a great relationship and they were happy to extend their facilities to me, knowing that I would not impose on the freedom of their members. All I had to do was stay aware of the conditions without getting consumed in my own activities.
Similarly, successful trading should be the same way. When you make a profitable trade and a stock meets your criteria for exit, don’t overstay your welcome! Knowing when it’s time to cash out and find another place for your trading capital is crucial to developing yourself as a profitable trader. Manage your trades well and you will end up happy. Staying too long and trying to squeeze that last drop of profit out of the trade will likely prove costly, not only in the current trade but perhaps also in your confidence going forward, depending on how much of your open profits you give back.
It’s been said that the last $0.25 can be the most expensive part of a trade, and I couldn’t agree more! So if you enter a stock for a trade, take most of your profits as a trade. Don’t say those 5 expensive words  or let a trade become an investment . Always following your trading plan and resisting that urge to get greedy will let you come out ahead with both your profits and confidence intact.
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]