Offensive and Defensive Trading

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. A boxer has to punch so they can win and also block so they don’t get knocked out. You have to be able to score points against the market while not allowing the market to score on you. You have to stay in the game to have a chance to win. You have to manage the risk of ruin so you don’t have a career ending injury.

  • Your entry signals are your offense
  • Your trailing stops for winning trades are your defense for not losing your open profits.
  • 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 while 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 hard earned profits has to be far above the desire for making quick money with big risks.