Years ago I was enamored with setups. The thought process was that if I could develop a fool proof setup that crushed the market, I would print money.
It found my setup, and it worked for a while.
Conditions were ripe, and money was printed.
I thought it would last forever, but it didn’t. Just as fast as profits had run, losses accumulated. I was depressed by this development, but it was the best thing that ever happened to me.
That’s because I realized that there is more to trading than setups.
As I analyzed my trades, I realized the setup was effective, but it worked best under the right conditions. When a variable hit that invalidated the setup, I would lose and lose big. However, that’s okay if I knew how and when to manage risk.
This is where trade management comes into play.
Successful traders understand how to manage the trade and the risk.
For example, in a booming market continuation setup work great. Until they no longer do. At some point the market will pullback hard, and a trader can get crushed.
That’s exactly what happened to me with my “fool proof setup” earlier in my trading career. However, if I had known how to manage the trades and risk, I would have been fine. Instead of taking big losses and continuing to trade a setup that was no longer optimal, I would have hedged and limited my risk.
That is exactly what we did today.
In this video I discuss how we rode the big market trend, but also exercised solid trade management and limited losses when the big market pullback eventually came.
— Paul J. Singh (@PaulJSingh) December 3, 2019
For more on swing trading check out my swing service at bullionwallstreet.com