Trading: The Difference Between Playing Offense & Defense


The sooner traders learn to carefully manage risk, the better off they will be. So many new traders come in with only the thoughts of profits dancing in their heads. This is equivalent to a football team only focusing on scoring points, and not planning their defense. In trading, you must play both sides of the ball. You have to be able to score points against the market while not allowing the market to score on you.

  • Your entries are your offense and your exits are your defense.
  • Letting a winner run is your offense, cutting your loser short is your defense.
  • Your automatic buy stop is your offense and your automatic stop loss is your defense.
  • Buying a monster stock is an offensive move, planning on how you will exit with your profits is your defensive move.
  • Identifying a trend is your offensive play creating a trading plan on how to trade it is your defensive play.
  • Your choice on what to trade is playing offense, choosing your position size is playing defense.
  • Your watch list is playing offense choosing how much capital to risk on any one trade is playing defense.
  • In trading your wins are not permanent and your profits can be taken back, when you score you have to next ensure that you are not scored on. The goal of keeping your profits has to be far above the desire for making quick money with big risk.