Trade Like a Quarterback

There is a misconception, especially among those new to trading, that to be a trader you must be active -- keep swimming in the market waters among the other sharks or you will drown. For individuals, this simply isn't true. There are times to sit on your hands and do little or nothing. We're in the heart of football season, so I'll put it in those terms. It's first and 10 and you, the quarterback, drop back for a pass. Your primary target is covered, so you start your check downs and find your second and third targets are also covered. The clock in your head starts sounding alarms, so you either dump off the ball to the running back or throw a pass well out of bounds and out of harm's way. The throwaway may seem like a loss. You are faced with second and 10 now, but you still have the ball and didn't lose any yardage.

Now think of it in trading terms. Perhaps you are relying on your trading income for a living. A day without trades is a day without any income or profit. It's a throwaway. It makes the next day or days a bit tougher, but not nearly as tough as trying to force a trade and take the equivalent of a sack (loss of yards) or a turnover (a major loss putting you on the defensive). The dump-off is like your go-to trade, or maybe an index trade, but you keep the position very small with a very tight loss. There is plenty of upside potential, but it is uncommon and unlikely. Very few dump-offs turn into touchdowns, but very few result in turnovers or major losses either. In other words, there is still a chance something very good or very bad could happen, but overall, it is a good approach to keeping you in the game without taking a major risk....320 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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