Top Tip: Cut your losses and let winners run

Cut your losses and let winners run – Everyone tells you this, but few can do it.

Trading comes down to psychology and everyone wants to win and no one likes to be wrong or be classed as a loser. Most unsuccessful traders take profits quickly, yet they will let losing trades run and run in the hope that things will get better. What I suggest is that you have a mechanical approach to exits and entries.

That is, you have a get out point set on opening a trade. Financial Bookmakers offer a guaranteed stop loss on most products. This means that you can place a bet knowing that the most you can lose is known, say £200, yet your profit could be unlimited.  Another good tip is to trail stops, which means you lock in some profits yet keep the trade running. Once a trade moves into profit, you could move the stop loss to your entry point; this means that the worse case scenario is a break-even trade.

Many class spread trading “as risky or for gamblers”. This is totally untrue as in fact with a guaranteed stop loss your risk is totally known ahead of time, unlike buying shares with a stockbroker.

Another point is that most new traders spend too much time planning when to get in and buy, when in fact they should spend much more time on the exit strategy and how much they are going to trade.

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