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Lou Mercer on Chasing Profits

Lou Mercer discusses his thoughts on chasing profits.

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Something I see new traders do is they often will try to chase a profit. So, for example, as I meet with them they'll say, 'How much do you think I can make in my portfolio as a percent this year?' What we really want to do is get them to focus on managing their risk. So entering a trade, and instead of thinking about how much money they can make on the upside, really about how much they're willing to risk on the downside. As you try to look for this unrealistic upside expectation, you often take a big loss and let it really move against you just waiting for it to come back and chasing that goal. So before you get into a trade, instead of thinking about how much upside you're looking for, really thinking about how much downside risk your portfolio can take.

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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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