Successful Traders Don’t Make This Mistake

Successful Traders Don’t Make This Mistake

Nick's Note: Today, we're handing over the reins to our colleague, master trader Jeff Clark. Below, Jeff explains the biggest reason most traders aren't successful over the long term.


I trade for a living.

The chance to go out to a five-star sushi dinner, or stay at home with mac n’ cheese, relies largely on how I trade.

I’ve enjoyed plenty of gourmet meals. I’ve certainly eaten my fair share of cheese-covered macaroni. And I’ll gladly live with the ramifications of my trading decisions – whether right or wrong.

But when the stock market is stuck in an insanely tight trading range, it gets frustrating.

Look, I get it… As a trader, I spend at least eight hours a day staring at a quote screen on my computer. It’s the only job I know where I can work intensely and still end the day with less money than when I started.

It’s also the only job I know where I can make a month’s worth of income in just 10 minutes.

So there’s a lot of motivation to do something, anything, to justify my existence.

But successful traders know not to trade out of frustration.

In a trading-range market, forcing a trade is usually a bad idea. Trades that are entered for the sake of just doing something are usually trades that will end up in the “loss” column. That’s why I occasionally don’t make a recommendation to my Delta Report subscribers.

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I like to send my readers a great trade idea once a week. But there have been a handful of times lately where I’ve not made a recommendation, or I’ve delayed one.

I’d rather subscribers be upset with me about delaying a new trade than suffer the loss of a trade that I made too early.

If we had a “drop dead” timeline – a date when we had to trade or else the world would end – then I’d give my absolute best idea. Sometimes, my best new idea is a 50/50 proposition. So I have no real motivation to suggest subscribers risk their hard-earned money on an even-money bet.

Other times, my favorite chart going into the week is on a stock my subscribers already own.

A while ago, I wrote multiple times to subscribers about the bullish setup in “wearable tech” firm Fitbit (FIT).

Three of the technical indicators – the 9-day exponential moving average (EMA), the 20-day EMA, and the 50-day MA – were coiled together. Energy was building for a big move one way or the other.

The MACD (moving average convergence divergence) momentum indicator showed positive divergence for the past six months! So my bet was that FIT would break out to the upside.

That is exactly what happened. And it looked poised to move even higher.

But this was a rare event. We don’t often get this sort of setup.

If I could spot that sort of setup every week, then the world would be filled with nothing but unicorns, rainbows, and lollipops. And my family would be enjoying five-star gourmet restaurant meals every day of the week.

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It’s a good example of the kind of trade I like to recommend. It’s a depressed stock with decent fundamentals. The technical condition shows a long basing pattern where all of the moving averages have coiled together to create energy for the next big move. And there was a catalyst for the next move – in that case, earnings.

Plus, similar positions in trades like Twitter (TWTR), Qualcomm (QCOM), Macy’s (M), and Target (TGT) produced profits over the following weeks.

I’d rather hang on to a trade, or even add to it as the technical condition looks bullish, than enter a new trade in an uncertain market environment.

So, despite the overwhelming urge to do something new, sometimes I tell my subscribers to stay put.

Our success as traders isn’t based on what we do in any one week. It’s judged on how we do over several years.

There will always be plenty of great trade setups in the future. Those opportunities are worth waiting for.

P.S. I’ve spent more than five years developing a trading algorithm that gives me the chance to make very large—and fast—gains. It takes advantage of special “profit windows” that open for only four days each year.

Over the last year, I’ve traded using this strategy 41 times. I have a 90.2% success rate… average gains of 50%… and an average trade length of just two days.

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