Trading with a trend

Suppose you have decided a share is climbing. The method still leaves you three decisions, and the order matters: where you get in, where you admit you were wrong, and where you take the money.

Getting in

The common mistake is buying the moment the move becomes obvious, which is usually after most of it has happened. The alternative is waiting for a pullback — a dip back towards the line or the average the share has been riding — and buying there. It is a better price and a shorter distance to your exit. It also means some shares climb away without you, which is what the discipline costs.

Getting out

• The exit you set before you entered, at the price that would prove the idea wrong. That is a stop loss, and where to put it is its own lesson.
• The target you decided on beforehand, taken when it arrives rather than when it feels right.
• The line breaking, or the price closing back below the average it had been riding — the pattern you bought has stopped being true.

Two of those three are decided before you buy. The one made in the moment is the third, and it is the one people talk themselves out of — there is always a reason to give a share one more day.