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How to Avoid Giving Back Your Profits on Market Pullbacks

July 08, 2014

Here’s a recent question that came in from someone who read my book and sent me an email today. He asked: “How do you avoid giving back profits on market pullbacks like I am experiencing now?”


My reply:  Take profits when you have them. Make a decision that you’re either a short-term trader or a longer-term “investor” – YOU CAN’T HAVE IT BOTH WAYS. You must sacrifice one for the other. When you finally decide to decide once and for all and make the decision as to what type of trader you are, your frustration will lessen and your performance will improve.


Trader or Investor?


The average trader spends the majority of his or her time vacillating between two emotions: indecisiveness and regret. This stems from not clearly defining one’s style.



Should I Buy?

Should I Sell?

Should I Hold?



I Should Have Bought

I Should Have Sold

I Should Have Held


The only way to combat paralyzing emotions is to have a set of rules that you operate from with clearly stated goals. You simply must make a decision: Are you a trader or an investor? Some people have a personality best suited for trading, and some prefer a longer-term investment approach. You will have to decide for yourself which is best for you.


Keep in mind that if you fail to define your trading, you will almost certainly experience inner conflict at key decision-making moments.


If you are a short-term trader, recognize that selling a stock for a quick profit only to watch it go on to double in price is of no real concern to you. You operate in a particular zone of a stock’s price continuum, and someone else may operate in a totally different area of the curve. However, if you’re

a longer-term investor, there will be many times when you make a decent short-term gain only to give it all back in the pursuit of a larger move.


The key is to focus on a particular style, which means sacrificing other styles. Once you define your style and objectives, it becomes much easier to stick to a plan and attain success. In time, you will be rewarded for your sacrifice with your own specialty.


Folks, you can’t have your cake and eat it too.  You must make a decision and live with it.



Excerpt from Trade Like A Stock Market Wizard by Mark Minervini (McGraw Hill Publishing –2012)


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