Know When to Go and When to Whoa

As we continue to talk about bias this week, there's an important one as traders we all need to master--knowing when you can or should keep your foot on the gas and knowing when you should shut it down and accept your results for the day, whether you're green or red for the day. First, apologies for the mixed metaphors--we are both riding a horse and driving a car today, apparently. Regardless of our confusing use of language, it can be a real struggle to truly know when it's a good time to whoa it up and shut it down for the day and when you should keep going. This determination is also frequently dependent on what kind of trader you are--and if you don't know, well, that might be your answer right there.

If you're a newer trader, I strongly believe that you should have both a daily profit goal and a daily loss limit, and at a bare minimum it should be a 1:1 risk:reward ratio. If your goal is to make $200 each day, then you shouldn't lose more than $200 each day either. Keep your winners as big as your losers (and ideally bigger) and even if you only hit your profit target 50% of the time, you're still breaking even. And that ain't too shabby, I reckon. If you're newer, you also shouldn't ever try to push beyond your daily profit target. There's no worse feeling than when you hit your goal for the day and try to go for more and then give it all back and then hit your max loss for the day. Trust me, been there, done that, it sucks.

Once you become more advanced though, it becomes more complex. I always like having a primary daily profit target and then a secondary stretch target. If I'm reading the market well, if I'm being patient and disciplined, if I'm feeling confident and the results are backing it up, then I can keep trading. That's where you have to have rules, though. Have rules about when do you stop trading once you decide to push--is it after your first loss? Is it after a second losing trade? Do you put a line in the sand and say you won't go below $X of profit before you stop trading? You can't just press on the gas and spin your tires wildly. That's how those people from all those internet videos end up hitting parked cars and light poles. Don't crash your trading account into a parked car--get back home safely, especially when you're having a good day.

Here are today's NQ levels:

Current Price: 15080

Upside Targets: 15125, 15170, 15216, 15253

Downside Targets: 15074, 15046, 14996, 14955, 14905

Stretch Targets: 15290, 14864, 14782 (giving a second downside here just in case)