BarroMetrics Views: Success and The Trader III

“Know when to hold ‘em, know when to fold ‘em,

Know when to walk away, and know when to run.” (The Gambler, Kenny Rodgers)

Learning this was one of the most difficult lessons I had to learn. Only know with the discoveries in neurology do I understand why. Our subconscious mind recognizes that the markets are uncertain and chaotic. Under these conditions it is how a market:

• approaches an exit  level
• what it does when it gets there and
• what it does after it gets there

that defines whether we should exit a trade (Pete Steidlmayer).  Consequently the subconscious rebels when a place a fixed stop at a pre-defined level

On the other hand, without a pre-fined stop, we are at the mercy of a catastrophic loss.

My solution was to place a fixed, maximum stop at a level allowed by my risk management; at the same time, I look to exit if the market is behaves in a way that suggests my scenario for a trade will lead to a loss (i.e. it is ‘wrong’). In this way, I satisfy both the right and left brain demands.

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