Pristine's Trading Lesson of the Week - 5/7/2009 - Email from Pristine.com

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Treat Your Losing Trades as Weeds

Good traders share some common traits with good gardeners. Have you ever seen beautiful, luscious gardens and landscaping covered with ugly, uncontrollable weeds? Of course not! That's because a good gardener takes enormous pains to eradicate the smallest weed the moment it rears its ugly head above his beautiful garden. He won't allow those nasty weeds to spread because he knows that the moment he allows this to happen will be the end of the beautiful garden. This should also be the attitude present in any trader's mindset.

Why do many traders let their stock portfolios get populated by weeds? It is unfortunate to see how traders will see weeds (losing trades) growing in their gardens (accounts) and sit idly without taking any action. Usually all it takes is one or two bad weeds in your account to spoil the gains of a whole month. The losing trade is like a weed or fungus that spreads and takes over the healthy part of your portfolio. If you handle it correctly by eradicating it from your account once it becomes visible (hits your stop), then your garden will continue to be beautiful. Don't go into "hope mode" by holding a losing trade that went against your expectations. Exercise stops at the speed of light. Once you are in a trade, you become a manager of that position and using the tools taught in Pristine's TPM seminar series you'll be able to objectively eliminate those bad weeds before they can kill your portfolio.

During our Pristine Trading Laboratories (Part 1 and 2) I give students a list of stocks they need to manage using the rules and method learned in our seminars, with the condition that they should maintain any position that hasn't given them a valid reason for an exit, while eliminating those that either hit the stops or give them a valid reason to close the position. This forces students to do what we teach! The first step under our objective analysis is to assess the market conditions (trend, pivots, market internals, etc.). Then they make an unbiased technical analysis of each stock. It drives the point home to ask them, "Is there any reason to close this particular position?" If the answer is no, then keep it! If the answer is a resounding "yes," then liquidate it - it is a weed in your beautiful garden causing pain to your capital account!

Come join me in a FREE online workshop I will be conducting on Wednesday, May 20th at 4:15 P.M. ET. I will be discussing Sector Rotation and how to use this in your daily trading preparation. You can register using the following link: http://www.pristineworkshops.com/info/moreinfo.aspx?EventID=2396

You can also access our other many FREE Online workshops at this following link: www.pristineworkshops.com

Trade Well!

SIMON BRAD
Contributing Editor
Intra-Day and Swing Trading Specialist
Sector and Basket Trading Specialist
Instructor and Traders Coach

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May 7, 2009
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Please keep in mind that all comments made by Pristine instructors and representatives are for educational purposes only and should not be construed as investment advice regarding the purchase or sale of securities, options, futures or any other financial instrument of any kind. Consult with your investment advisor before making an investment decision regarding any securities mentioned herein. Pristine instructors and representatives assume no responsibility for your trading and investment results.

Information for the stock observations was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. The author as well as other Pristine employees, representatives and "affiliated" individuals may have a position or effect transactions in the securities herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

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