Your Trading Objective: Why is that so Important?

You've decided to try your luck at trading stocks or commodities, but so called experts tell you that you need to determine your trading objective. What exactly does that mean and why is it so important? Well, it's really a question of your trading philosophy. A trading objective basically identifies the horizon on which you've chosen to trade. For instance, a day trader will have totally different set of objectives and goals than will a long term investor. They look at the market through different sets of glasses and it can be very dangerous to your trading account to try to mix and match trading styles.

Let's first look at the most common trading objective ? long term investing. Long term traders are usually more concerned with company fundamentals such as earnings, annual growth, and sales to name a few. They may use some technical indicators such as price charts and graphs to help time their entry points, but fundamentals are generally more important to them. Long term traders are looking for that home run trade that will pay very large profits. Therefore, they can be right as little as 20-25% of the time and stay earn a nice profit. They have been known to hold a given stock for several years.

The other end of the trading objective is the day trader. Day traders go into the market each day looking for quick small moves of less than a point ? known as "scalps". They use technical charts exclusively and typically buy large positions which they often sell within minutes. Their profits on a given trade is much smaller than those a long term investor would generally make, so therefore day traders must have a very high winning percentage of trades ? usually 60% or more to be successful.

These trading objectives are two extremes and are discussed here to illustrate a very important point. If a day trader takes a position based on short term indicators from a chart or other technical indicator, it would be a huge mistake to change that trade into a long term investment because the trade setup wasn't based on a long term trade. Inexperienced traders will often do this when a short term or swing trade goes bad. Instead of cutting their losses by simply selling the position, they change it into a long term trade hoping that the position will become profitable. DO NOT change your trading objective ? stick to you trading plan. This rule will protect your account.

Chuck Cox is a Technical Writer and Industrial Scientist by professional with a background in statistics. He has used mathematical and statistical methods to invest and trade in the stock, futures, and options markets. Chuck has owned various businesses and presently operates several websites. To investigate and learn more about trading stocks, visit his website, http://www.earncashathometoday.com/trad ing-stocks.htm

---

Red, Green, Yellow - or - Stop, Go, Go Very Fast: Which Describes Your Online Trading?

Ever notice how behavior in one area of life can... Read More

Your Job

There are so many kinds of work that needs to... Read More

Investing in the Stock Market - When To!

Is really not as important as to how you invest... Read More

The Stock Market - How Just One Question Will Tell You All You Need To Know About Your Stock Broker

Last time we looked at the real performance of the... Read More

How To Make, And Keep, Money Trading Stocks

If you are serious about making and keeping money by... Read More

Eternal Sunshine

There is a current movie entitled "Eternal Sunshine of the... Read More

How to Maximize Your 401k Mutual Fund Returns

When it comes to 401k's there is an overabundance of... Read More

Expense Ratios

Mutual funds and brokers are always preaching not to buy... Read More

Selection Vs Direction

As I have said many times before in this column... Read More

Oil Stocks CHK WLL - What Is Their Worth?

(1) CHK stock price $16.74, NAV $32.5CHK is my favorite... Read More

Bull or Bear?

Cat or dog? Maybe Zebra. Shucks, I don't know, but... Read More

Why Is The Macedonian Stock Exchange Unsuccessful?

The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More

Keep Your Profits

It looks like we have now entered a new bull... Read More

Stock Trading - Daddy, Why Arent We Rich?

One Saturday morning, while he was sitting at his computer... Read More

Money, Insanity and Wall Street

Money: the most charged word in the planet. It means... Read More

Stock Trading Secrets?

How often have you come across an advertisement or e-mail... Read More

Cash Is A Position

I go to the Money Show every year to visit... Read More

Social Insecurity

Just about everything you have been told about Social Security... Read More

The Seven Mistakes All Novice Traders Make and How to Correct Them

We learnt the following the hard way! If any of... Read More

The Golden Goose is Sick

It is finally catching up with them. The brokerage companies... Read More

Boiler Room 7/17/00

On Friday or Saturday evening my wife gets a movie... Read More

Financial Crime

Congress recently passed another new law that is supposed to... Read More

Buy and Hold Investment Philosophy

Wall Street has been preaching the doctrine of Buy and... Read More

Shadow Bull

As one of my regular readers you know I have... Read More

Moving Averages

Every day on CNBC-TV they show a 200-day moving average... Read More

Its Better

Question: How does it get better when it gets worse?Last... Read More

True Investment Road Maps

If you don't know where you are going any road... Read More

Pension Plans

If you have a pension plan at work you will... Read More

9 Deadly Trading Mistakes!

The following are a list of nine things you want... Read More

Trend Trading - Trading Stocks Using Technical Analysis and Swing Trading Strategies

Peter is a professional trader, Paul is not. Peter has... Read More

Dont Ask Your Broker

Unfortunately, most of you who are reading my column are... Read More

Forecasting the Stock Market

Every day I see in the financial section of newspapers... Read More

Price to Earnings Ratio - P/E

After finding the price of a particular stock, usually the... Read More