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Lou Mercer on Planning Trades

Lou Mercer discusses his thoughts on planning trades.

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Having a trade plan is extremely important to the success of your trading. Treat trading as a business, right? Have a trade plan, have a business plan on why you buy something and why you sell something. We encourage clients to have a set rulebook on why they’re buying something and why they’re selling something. Have things like, ‘Am I trading in the direction of the trend? Am I buying stocks that are going up or am I shorting or avoiding stocks that are going down?’ You might create different rules, where you only buy a stock if it’s above a certain moving average or you don’t buy something if it’s below a certain moving average. You should have a set rule base, a set trade plan on when you buy and when you sell to keep you in control of the trade. Without a trade plan what will often happen is you’re little losses become big losses, you often get stuck in your losing positions, or you might trade too frequently trying to make back a big loss. It’s extremely important to have a trade plan to keep you on track for your trading.

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