Have you ever had a losing streak as a swing trader?
It happens to everyone. And when it happens, it can be discouraging.
The question I ask my coaching students when they find themselves on a losing streak in their trading is “what is your profit goal?”
If you are an active trader, this is a great question to ask yourself.
Because one of the most challenging aspects of prudent trading is knowing when to sell.
From my own experience, I’ve found that most aspiring swing traders sell too late instead of too early.
Of course, this is largely driven by a fear of missing out on more potential upside by closing out a good trade too soon.
But such thinking often leads us to fail to capture solid gains when we’ve earned them.
This is where setting a profit goal can bring some needed discipline to your trading and help you end your losing streak.
As a general rule, I adhere to the following profit goal guidelines among various trading styles:
Day traders: Up to 1% from each trade
Swing traders: 1%-10% from each trade
Position traders: 20%+ from each trade
Of course, these are just general guidelines. It is required that the individual trader choose his or her own trading style and profit goal based on his or her own goals.
A lack of a profit goal often explains a trading losing streak.
Let’s say that as a swing trader, my profit goal is 5% from each trade.
That means that I am seeking to sell every trade when it reaches 5%. By using a sell limit order, you can automatically close out a swing trade when it reaches your specified price.
My profit goal will also help me determine which trading setups are right for me.
If I am happy with a 1%-2% short-term return, I can be much less picky than if I am seeking a consistent 10% return.
Trading is difficult. It takes time, discipline, patience, and consistent education to succeed.
So when you find yourself in a trading slump, consider imposing a strict profit goal on each trade to get your confidence back.
Just some words of wisdom for those traders who want to impose more discipline in their trading rules and potentially experience greater success in a variety of market conditions.