Preserve Capital for Trading

Preserve Capital

The concept of preserving capital is as important as the function of maximizing profits. That is the mainstay of most investment advice. How does maximizing profits and preserving capital intermix? Utilizing the candlestick signals and high-profit patterns establishes expected price movements. Once a trade has been established, historic results demonstrate price movements that should be anticipated. Results should be somewhat predictable. If the projected trend does not confirm those expected results, then another analysis should be made immediately.

The analysis should be made on a very simplistic basis. Are my funds being allocated into a position that will benefit the portfolio? Are those funds utilizing the benefits provided by the signals in the patterns? If an evaluation does not confirm both of diose questions, then investors needs to ask them­selves, “Why am I in this trade?”

There will always be a supply of excellent buy signals or sell signals pro­vided by candlestick signals. Each day or whatever time period you are trading, there will be more trade opportunities than most investors will ever be able to take advantage. Why stay in a trade where you do not have analytical control? There is always somewhere to invest your funds where the signals indicate a high probability trade direction.

The decision process is made easier with a doubtful chart, as seen in fig.11-1, the Rigel Pharmaceutical Inc. chart. When there does not appear to be a strong probability of upside potential, moving funds to another trade such as the Daystar Technologies Inc. chart, fig, 11-2, makes sense. The probabilities for upside potential are much greater when all the indicators line up. Moving funds from the low probability positions to high probability positions will produce consis­tent profits over the long run.