I was at a barbeque over the weekend, and was talking with a friend of mine about a trade he currently had on oil.

Now this was a guy I went to school with… smart guy, so being ever curious I started to question him about his position and his thought process.

Now I knew he traded stocks during the tech boom, but didn’t do too well during the bust… that’s why I was curious about how he was trading oil.

He taken a short position on oil…

Ok, so what was his reasoning…

“Oil has been going up like crazy, and there’s no way it can just keep going up like this… its due for a correction.” he told me…

Ok…

So I asked him what his exit plans were…

“Exit plans?” he replied?

“Yeah, where will you exit if the trade goes against or for you?” I inquisitively asked…

“Never really thought about it. I guess I’ll know when the price gets there.”

We’ll see how the market shapes up over the next few weeks, and how he does (if he’ll share with me)… but this leads to a couple of good lessons…

1. There is no such thing as too high or too low. YOu can ‘reason’ and ‘hypothesize’ as much as you want, but in the end the market will go where it wants to go. While picking tops and bottoms are great, the fact is you can make just as much (if not more money) by simply trading the trend in motion.

2. Trading without a plan is a recipe for disaster. In other words making trading decisions on the spot, in the heat of the moment is something that I’m willing to bet NONE of the professionals do. All trades and decisions are made before hand… scenarios are mapped out in advance and simply executed in realtime.

Don’t fall into this trap! Learn from other people’s mistakes!

Continued Success!

Ray

P.S. Many courses on the market aim to teach these 2 key principles… I KNOW that my two courses www.market-millions.com and www.trend-range-trading.com both cover these elements in great detail.

Categories: Trading

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