TradingBlog

Frequent exits due to stress occur when traders stop out at a stop loss level, close the trade into high volume spikes, or attain predefined targets. All trades should have a stop loss in place. Some traders hold a mental stop while others place physical stops. Traders stay with the market as long as a positive trend exists, until a trend reversal stops them out.

Simultaneously trend reaches a climax illustrated by price movement on the charts. This moment everybody start to jump on board the trend, whatever the price, whatever the direction. Smart traders go against the crowd by closing positions into such spikes and they occasionally experience stress due to trade exits or probably not. Other traders prefer to set targets for their trades. Target levels are frequently set near the next resistance level for long trades, or support level for shorts. Sometimes targets are based on a multiple of a market movement, or swing, already apparent on the charts. Other times, targets are set at a multiple of risk with no particular reference to the chart. As a day trader, there are certain psychological aspects to the stress exit which are important. A day trader can usually get into a trade quite quickly at the open. However, the exit may not come for a long time. Indeed, if no other trigger has arisen, the trade may be exited in the last few seconds of the market session. Ensure to decide your way forward whether to use an exit strategy or choose a strategy that lets you walk away.

Most of the traders want to be liberated from staring the screen for hours. This is to avoid psychological stresses as the market swings up and down. To avoid stress unnecessarily set a target, a stop loss, and a market order to exit at the end of the session if neither of the other two orders works. Another idea is to set an automatic trailing stop loss of fixed size. The trailing stop loss order may be connected through an OCA (one cancels another) group to a market order exiting the trade at the end of the session if nothing else has happens to experience minimal stress due to trade exits.

Only those with practical trading experience will really understand, but believe me, the most stressful trading hours are those spent watching each market tick. Even if you are winning, you go through the torment of seeing large paper profits severely eroded during pullbacks. Sometimes, you surrender and take a small profit while it is still on the table, only to see price turn right round and race back up to new highs.

If you are a day trader, I strongly urge you to adopt an exit strategy that can be automated, so that your trade is left to work as planned without your being tempted to tinker with it. Come back at the end of the session and check your results for a minimal stress or even not.