Guest post from visionsofaffluence.com
You got to know when to hold ’em, know when to fold ’em
Know when to walk away, know when to run
These are the lyrics to what many consider to be a great song, The Gambler by Kenny Rogers. Despite the obvious poker reference the message in these lyrics contains knowledge that applies to many areas of life. Indeed, knowing when to walk can save you lots of time and aggravation, and in the case of trading it can save you a whole lot of money.
Too often traders find themselves taking a loss and then immediately jumping right back into the market and ending up losing again only to jump back into the market in an attempt to recoup losses only to take another loss and before you know it the trader has loss a nice chunk of his account. Now why does this happen? Well quite simply it’s because the trader feels that he needs to keep trading to make his money back even though by continuing to trade he is only making matters worse. This is where the wisdom of Kenny Rogers comes into play because if these traders knew when to walk away they would keep themselves from losing even more than they already have.
Even though this is the trading business sometimes the best thing to do is to refrain from trading. If you have taken a string of losses don’t keep trying to force a winning trade, instead you should stop trading and then come back later and analyze your actions to find out what you were doing wrong. This will help you not only because it will keep you from extending your losing streak, but also because it will help you to learn from your mistakes so that you will be less likely to make them again. So the next time you find yourself down on the day and itching to jump back in to another trade I want you to pause for a moment and think to yourself, what would Kenny Rogers do?
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