Respect the Pullback: Let the Market Recalibrate After Gains
After a euphoric Monday, don’t be afraid to let some unrealized gains pull back to allow the market to recalibrate for bigger run—especially if you’ve already taken partial profits yesterday.
I stick to a systematic 10-MA trailing rule with no secret formula to sell anyone. Some of my positions can stretch beyond 25 trading days, so dont belittle the power of trailing MA as short as 10 especially if you on high ADR% names.
There are losses during the period, but they’re very obscure due to my 3-stop and breakeven stop rule, which typically cuts those down to under 2-4 days of holding and below 0.7R.
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“You can reduce successful trading to 4 key principles:
1. Trade with the trend,
2. cut losses short,
3. let profits run, and
4. manage risk.
Any successful trading approach will necessarily incorporate each of these principles in some way. Note that learning to predict the markets is not one of the principles... I have news for you.
The markets are not predictable.”
-Bruce Babcock, The Cardinal Principles of Trading (1996)
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