Anthony Speciale Stock Market Analyst

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MORE MONEY, MORE QUICKLY, MORE SAFELY.

How to Mitigate Losses When a Trade Turns Against You

I’m in this Alphabet Inc. short position… You can see that the trade had come literally within a few dollars of hitting my target.

It happens to the best of us. We get into a trade setup… only for it to turn against us.

When that happens, how do we save ourselves from more pain than absolutely necessary?

Well, that’s what we’re going to discuss today because it is bound to happen to all of us eventually.

This can transpire across several scenarios…

Stay Cool

A trade could be moving along nicely, just a few ticks away from hitting its target, only to do an about-face and move the other way.

Or we could be holding a position for a period of time that’s just not working for us.

Either way, we have to remain calm, cool and collected.

In order to do that, it’s much easier if we have a written trade plan to refer to so we can consistently manage our positions.

One of my personal trade management plays is as follows…

Upon price trading within 1% of my target objective, I move my stop loss to breakeven.

I’m not going to let a trade that came so close to filling my target turn into a losing trade.

For example, I’m in this Alphabet Inc. (GOOGL) short position…

You can see that the trade had come literally within a few dollars of hitting my target.

But at this time, it’s fallen short.

Weekly Chart of Alphabet Inc. (GOOGL) — Source: TradingView.com

I’m not going to let this trade cost me money, so I’ve advanced my stop loss to breakeven.

Whatever the trade does at this point, my risk is zero, and my reward is full boat.

Minimizing Losses

Now, the worst-case scenario is that you enter a trade, and it goes against you right from the get-go.

What do we do in that situation? Well, first, we always have a stop loss in place just in case the market goes wild.

But what if the price is just hovering around the area where we entered the trade? In that instance, I would wait to see if the price confirms in the opposite direction.

By that I mean, if I get my 1%+ confirmation in the opposing direction to the entry of my trade and I haven’t been stopped out, I would then consider exiting my trade early to mitigate my losses.

In other words, if price action confirms against my position, I’d then exit. But as long as the price continues to flutter around and doesn’t confirm against me, I’d continue to hold on.

Listen… We can’t avoid losses. It’s just part of the deal when it comes to trading.

But what we can do is build a plan to keep them to a minimum!

This is why it’s imperative for you to have a plan when it comes to managing your open positions.

Most folks forget to think about the management aspect because they’re too focused on the entry and exit of the trade.

But the real name of the game when it comes to making money is actually not losing money.

Join the Alliance

If you’re looking for a plan to grow your wealth, consider checking out my Rapid Wealth Alliance research service, where we run a portfolio of approximately 20 great companies that meet our ultra conservative criteria.

We find undervalued companies with strong fundamentals and financials for long-term value investing.

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If you’d like to give Rapid Wealth Alliance a try, please click here now to learn more about my approach to value investing, portfolio building and wealth creation!

I look forward to seeing you on the inside next Tuesday for our live weekly session!

Rules to Live By

“It is not the size of the dog in the fight that counts, but the fight in the dog that wins.” Arthur G. Lewis

Until next time, I wish you a beautiful and blessed day!

Yours In Trading Success,

Anthony Speciale Jr.

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