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Lee Bohl on Chasing Profits

Lee discusses the risks of going for big profits and alternative plans that may work out better for you in the long run.

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I think one habit I've developed over the years is trying to balance risk against chasing a really big profit. Now, going for a big profit is, of course, exciting, and you've probably had friends tell you, 'I made so much money on this trade.' But I've also found over the years that people don't tell you about their big losers. So I think you have to be realistic in what type of profit you think you're going to make. Now, just think about it for a second: If you lose 50% of your account on one trade, what do you have to do to break even? You got to double your money, which very rarely happens. So risk management is the key to trading. What I would say is be realistic with both how much you're going to risk versus how much you're going to make. Try to win over a series of trades and not just one.

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Important Disclosures

Past performance is no guarantee of future results.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

This discussion is provided for illustrative purposes only, and should not be considered an individualized recommendation or personalized investment advice. The strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction for his or her own particular situation.

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