When in Doubt - Get Out the Trade

When in Doubt - Get Out!

The most important aspect of investing is the ability to put the probabilities in your favor. The primary function of candlestick signals is to identify high-probability investments. The purpose of the step-by-step analysis of the mar­kets, sectors, related stocks, and other trading entities, that would support the reasons for a candlestick signal to be acted upon, is to develop a high-probabil­ity correct trade scenario.

The primary reason for establishing a trade is the identification of favor­able indicators. Taking advantage of centuries of observations of investor reac­tions has created signals that make a profitable trade very plausible. That was the reason for putting on the trade. The investor has made an evaluation of a trade setup that has worked correctly in the past.

The candlestick signals are indicators of what price movements should occur in the future, with reasonably high predictability. If the trend/price, movement, after the candlestick signal, does not produce the results expected, or the price action starts creating some concern, close out the position. The reason for establishing the trade was to benefit from the probabilities estab­lished from historic previous results.

Why remain in a position where the favorable probabilities appear to have diminished? Remaining in the position puts your investment funds exposed to market moves that do not enhance your profit potential. A high probability profitable trade signal still has the potential for creating losses. Hopefully, the potential of a loss is diminished. Keeping funds exposed to a position, where the favorable probabilities have disappeared, makes the potential of losses that much greater.

If the premise of your investment strategy is to keep placing funds in high-probability trade situations and trade does not appear to be working, close it!!! Preserve your capital whenever in doubt. The capabilities of the candle­stick signals and patterns are always going to be available. The purpose of investing is to maximize your profits. The benefit of candlestick signals is to identify high-profit situations. When a candlestick investor does not have a strong feel for what tire trend is indicating, close the position. There are more strong trade signals occurring every single day/week/month, one minute/five minutes/ fifteen minutes on a candlestick chart somewhere. Preserve the capi­tal to take advantage of the next trade.