Английский язык. Практический курс для решения бизнес-задач

Also known as «you’ve got to know when to hold up, know when to fold up.» Show me a futures trader who doesn’t use stop loss orders and I’ll show you someone who loses a lot of money. Before initiating any trade if you haven’t already figured out at what point you would be wrong and would want to cut your losses or, at the very least, reevaluate your position from the sidelines, then you shouldn’t be putting on the trade.[3] You should also have a profit or price objective that is at least twice the proposed risk, and you should never take a profit just for the sake of taking a profit.

Options, of course, are different because of the inherent liquidity problems in some markets and because frequently the reason an option is purchased in the first place is to «ride the wave», or position trade, using the fixed risk of the option premium itself.

III.Thou shalt not let large profits turn into losses. Also known as «stupid».

The most common scenario is: You’ve had a favorable move in the market, maybe you are up a few thousand dollars per contract. Hopefully, you followed the second commandment and placed an open stop loss order when you initiated the trade. But now you are afraid to raise your stop and lock in at least some profit because you don’t want to get «whipsawed» and stopped out. Then the market reverses. So you let the market take back some of your profits, hoping it will turn around again, until all of a sudden your once profitable trade is now under water and in real danger of being stopped out at a loss! What went wrong? The answer is: You didn’t raise your stop. Most pros use a trailing stop system, (a pattern of raising their stop to lock-in profits) based on either chart points or a pure money management approach. You should too.[4]

IV.Thou shalt not let thy emotions rule. Also known as «a fool and his money are soon parted».

This is probably the hardest commandment to keep. Yet, I have never seen a successful trader over the long haul who didn’t follow it. Most people want to be winners. Most people want to make the big score and have the accompanying bragging rights. We all tend to get greedy, speculators usually more so. But trading is a business. You must be cool, calm, and always ready for the next opportunity. You can’t have high highs or low lows because you’ll make too many mistakes, and mistakes mean losses. If you start winning and get «too high», the tendency is to over-trade. By that, I mean starting to make marginal trades just for the sake of making trades, instead of waiting patiently for the right opportunity. If you get too low (this is usually after some losses), you are liable to skip the trades you should be making, or you might try to «cherry-pick» a system or an advisor’s recommendations for fear of more losses, inevitably making the wrong choices. To win this game you must remain clear-headed.

V. Thou shalt not place all thy eggs in one basket. Also known as «live to trade again.»

Ask any pro trader how much of their total account they risk on any one trade and the answer undoubtedly that will come back will be not more than ten percent. Why? Because the successful trader knows that losses are part of the game, and that frequently a few big profitable trades during the year more than make up for all the little losses, and they want to be around when the next opportunity arises.

VI. Thou shalt not buy deep out-of-the-money options. Also known as «you get nothing for nothing».

This is also known as the broker’s best friend.