October 27, 2008 at 7:05 pm | | Comments 1

World Series Series, Part 5 – Avoid the Squeeze Play

This is Part 5 of a series, be sure to check out Part 1, Part 2, Part 3 and Part 4 as well. New posts will be made during game days of the World Series.

Losing is Losing, Or Is It?

In baseball, there’s no official clock but there are innings and outs. That makes it simpler to gauge how many opportunities are remaining to make up runs when trailing. You’re either going to win or lose, and in the case of the latter, it doesn’t matter if it’s by one run or eight.

So it’s not surprising that late in the game, the team which is on the verge of losing is apt to taking some extraordinary risks like the squeeze play in an effort to erase the deficit. After all, if it fails, they’ll be no worse off.

However, in trading, it’s a vastly different story.

Stay Patient

Losing small is way different than losing big. Small losses can be made up quickly, forgotten fast, and put in the rearview mirror with even one or two decent winning trades. On the other hand, big losses leave lasting bruises on a trading account. They scar the ego indefinitely, and they’re sure not easy to overcome.

It’s a basic fact that you get paid for taking risks in the market – there’s no denying that. However, that doesn’t mean unnecessary risks should be taken. Whether it’s right after taking a tough loss, at the end of a poor trading day, or the last day of the month, there’s no way to justify trying to be a hero. Attempting to make up the difference with a last-minute save is often the best way to compound the problem, not solve it.

Instead, stay patient. Hit singles for satisfaction. Wait for only the highest-quality opportunities to come along. There will no doubt be many sub-par chances to put money at risk each day, but you’re going to make real progress with your trading by focusing on the best ones. It requires patience to wait for them, which isn’t always fun or glamorous. But winning is fun, and your decision to trade the best setups is going to increase the odds that you’ll be victorious.

The goal is to live to trade another day, week, or month. If your survival as a trader comes down to the outcome of just a single trade, then you’re toast – whether that’s today or some other time. Always play the game with your head on straight, and remember that losing small is far better than losing big.

Trade well out there!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service

[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]

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  1. I’m glad I found your blog, I hope you start posting again soon. One of the largest problems with losses is it gets progressively harder to make up the money each time. A 50% loss requires a 100% gain to make back up. The long term buy and holders often forget this point.

    Happy Trading,

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