Trading a market is like serial dating.  It’s one where you have no interest in a long-term relationship or marriage. You get in, hold for a short period of time and then you exit. The date or the trade can either go well or go bad. But you know, it will come to an end. And then you will move onto the next date (trade). Here’s why you never want to ‘marry’ a trade…

Trading Strategies 101: Why holding onto a trade is BAD

Nine times out of 10, a stop loss is the most effective way to get you out of a trade that goes against you but what happens when the trade simply does nothing – e.g. the market that you got into, goes sideways for weeks even months?

You now sit with these potential problems!

Problem #1: Money tied up doing nothing

You’ll have your money tied up in a non-performing trade. And this becomes an opportunity cost as you could have used the money to take on more trading positions.

Problem #2: The emotional rollercoaster

When you hold onto a trade for too long, emotions kick in. You’re likely to become emotionally attached to the trade, the longer you hold it.

But here’s the biggest issue:

Problem #3: The daily interest charges eat away at your portfolio

It’s like a silent killer… Slowly eating away at your portfolio with daily interest charges.

When you hold onto certain long (buy) and short (sell) positions, you pay an interest charge (fee)for every day its open.

This fee might seem negligible when you only in a trade for a matter of days. But after five – ten weeks – You’ll really start to feel it.

It’s like a leak in your boat; slow and insidious, it drains your portfolio without making a sound.

This is why I use this foundational rule in my trading strategy.

Trading strategies 101: Enter the Time Stop Loss – Most underrated trading rule

A Time Stop Loss is a simple manual rule that gets you out of your trade, after a certainperiod of time.

You can choose between 1 day, 10 days, or even 50 days.

It all depends on your trading style and strategy.

I use a 35 day (5 week) rule.

If an open trade lasts longer than 35 days, I will exit the trade no matter what time of day or what the price is trading at.

When you enter your trade, in an excel document or in your journal you’ll jot down the time-stop loss date you’ll exit at.

Also make sure you set a reminder (on your phone or somewhere else) to not miss the date.

This rule will ensure your trading keeps you focused on your short term goal: banking winners and cutting losers without incurring high and unnecessary costs.

PS. Looking for ways to hedge your long term portfolio, then Pickpocket Trader is a great way to create short term profits…