Hey.
Stumbled upon a concept.
Calling it the throw-off, and…
…sharing it with you.
How many times have you booked too early?
Booked late?
Gotten in early?
Late?
Not risen to required action?
Made a bad decision?
Lost faith in the market?
In yourself?
These are results of throw-offs.
Something has thrown you off your game.
This something is the ongoing market action at the time.
Action has been such, that it has thrown one off one’s track.
It’s not your fault. Action is such.
Price hits a stop, for eg. You take the stop. Price resumes in same direction.
Price hits a target. You get out. Price resumes.
Price falls just short of the stop, resuming. You double down. Price then breaches stop and a down-trend starts.
Price shoots past target, not giving you time to act. You then define a new target. Price nose-dives beneath old target, just as fast, eating up a good portion of your original profits.
Examples can be many. Common factor is market action throwing you off your profits, or throwing you out in loss.
Where do we stand?
Is this cause for alarm?
Is there something we can do about it?
First up, market action is a sum resultant of all market behaviour put together, and is perhaps impossible to defy. Our pockets are not deep enough by miles.
We don’t fight market action.
We use it.
Yes, since we can’t defy it as such, we make it work for us. Also, if market action alarms you, do something else which doesn’t. That’s where we stand.
It’s ok to be thrown off while following one’s trading plan.
It’s not ok to be thrown off, having been psyched into altering one’s trading plan mid-trade.
Meaning that it’s not ok to book below target owing to adverse market action above one’s stop.
Also, when a trade is going against us, again, it’s not ok to exit owing to adverse market action above one’s defined stop.
One exits at stops, not above. Sticking to this one rule will nullify throw-offs above stops. Defining is easy. Doing is difficult. Over time, with practice, we define and do. Period.
Now we tackle targets.
How do we knock-out throw-offs here?
Another day, another defining rule… 🙂 … .
Don’t exit at targets.
If you don’t exit at targets, no one can throw you off before a target.
Ok, so what’s the exit strategy whilst in profit?
Have a target.
When it comes, it triggers your stop into existence, which you have defined x% below this target.
So, we now stop using the word target. We use ‘trigger’ instead.
In other words, your stop gets activated, or triggered into existence, once a certain profit-threshold is crossed.
This stop, which has just come alive, is dynamic in nature, towards the profit-side only.
It moves in the same direction as the price, in a proportion defined by you.
As price keeps moving, your stops keeps locking in more and more profit.
You’ve knocked out the throw-off, since your exit is completely rule based, and no one else knows the parameters (numbers) you are feeding in for exit.
Eventually, price action makes you exit rule-based, when price reverses above the ‘trigger’ and hits your dynamic stop. Market action hasn’t succeeded in throwing you off your game.
Notice one thing?
You’ve been in control of your trade all along.
Your head is sane, your emotions are stable. You have set yourself up to take some very profitable decisions.
Wishing for you lots of profits…
… 🙂
.
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