Trend Trading For Dummies

Chapter 23

Using Stop Signs to Keep You Safe

In This Chapter

Placing initial stops in the right place

Placing trailing stops to minimize losses

Thinking about money management daily, weekly, monthly, and yearly

A popular saying among traders is, “Keep your losses small and let your winners run.” Traders want their losses to be small and their winning trades to be big, but the obvious question is how do you do that? Chapter 22 addresses that question partially by showing you how to hedge your position to avoid the occasional drastic loss. This chapter focuses on how to minimize the normal, everyday losses that are a natural part of every successful trading method.

Some professional traders say that how you manage your losers and your risk is more important than how you manage your winners. However, I believe that managing both your winners and losers is critical, which is why the quote is, “Keep your losses small and let your winners run.”

Traders often do exactly the opposite for the simple reason that they focus on making money rather than trading and trusting their rules. This adversely affects their behavior because by focusing on making money, they

• Take profits too soon out ...