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| A Word of Advice: Do not Think, React in stock market
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Article Author:
Steve Peterson
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Here is another example of how futures trading are quite different from everything else in life. In every other endeavor we are taught to think first, and then react. In futures trading—with a caveat to follow—you are often far better off reacting first and then thinking later. The caveat is this: this is only true if you have developed and are executing a well thought out trading plan. If you decide that you will exit a particular trade if a certain set of Criteria is met in stock market, then that is exactly what you need to do. The specific chain of events that caused your exit criteria to be met are completely irrelevant. While they can be analyzed after the fact for information that may help in the Future, they cannot be allowed to convince you to do one Thing when you know you should be doing something else. At the most base level considers a floor trader who typically scalps the stock market trying to make two or three ticks per Trade. He is long 30 T-Bond contracts when a huge wave Of sell orders hits the trading floor. He has two potential Courses of action:
a) Stand around and try to figure out “why” a wave of Selling is occurring
b) Start hitting bids instantly to exit his long positions If he is a good floor trader and if he wants to survive, he Will choose b. In other words, he needs to react immediately. Every second he spends analyzing the situation costs him money in stock market.
If a situation arises for which you have already determined exactly what you should do in case of just such an event, react and do it. Don’t think (whoever thought you’d hear that kind of advice?). If a situation arises for which you have not prepared, and you have no idea how to react, and then think in terms of risk control. Ask yourself, “what are my choices and which one is the least likely to result in a huge loss?” Then do that.
For more information please visit www.snpnifty.com |
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