Candlestick Stop Loss Reasoning

Candlestick Stop Loss Reasoning

Limiting your losses, using visual analysis, with the candlestick method has immense advantages. Understanding the signals, knowing why it is time to enter a trade, makes it easy understand when to be out of a trade. Applying arbitrary percent movements do not pertain to what the price movement is expected to do.

The basic premise being that the majority of trades will be profitable uti­lizing candlestick analysis. That still means some trades are not going to work. Having a prepared mind set for addressing the losing trades keeps funds mov­ing to the best probabilities. Most investment programs teach very little about getting out of losing trades. Cutting losses short is prudent advice. Yet very little is taught on how to recognize tire losing trade. Even less is taught on how to effectively close out the losing trades.

Learning when a trade is not working has two benefits. Limiting the loss is tire obvious benefit. Additionally, getting those funds out of a nonproductive trade and placing them immediately back into a potentially positive trade greatly enhances the ability for those funds to create gains for tire portfolio. Doing so immediately creates more opportunities to make profits. Plus it keeps the mind clear, not having to use mental energy worrying about a position that should be closed out.

How often do we hear investors say when their stock position is going down, “that’s alright, I’m in this position for the long term, and it will come back?” Poppycock!!! That is the answer of somebody that does not have a strategy for coming out of a position.

Know why you are going into a position. Know why you want to be back out. That gives you control of your portfolio management. The price moves are not throwing you around; you are maintaining control of your portfolio. The constant cultivation of placing investment funds where they should be or clos­ing positions that are not doing what the signals indicated will greatly enhance the profit potential of a portfolio. Remember, this is not rocket science, this is simple commonsense evaluation of what tire buyers and sellers are doing.