I remember being thrilled as a very little boy when "The Greatest Show on Earth" came to town. The Ringling Bros. and Barnum & Bailey Circus would make its way to our area every few years.
They would have a parade through town with the animals, clowns, and performers bringing a carnival atmosphere to the region.
When the circus started that night, I loved the animal acts. The clowns I could take or leave. But what really mesmerized me were the acrobats who did daring feats high in the air. Trapeze acts, where timing, agility, and strength combine to provide thrilling shows way up high, fascinated me.
As I think back, there was a good reason that a little boy like me could enjoy the thrill of those seemingly death-defying high-wire and high-flying acts without being terrified.
The performers had a safety net.
A huge and very elastic net under the acrobats allowed them to attempt amazing feats high above knowing that a mistake would not do irreparable harm.
In The 10-Minute Millionaire system, we too benefit from several types of safety nets.
Let's look at why we can sleep soundly at night, knowing that our high-flying trades have the proper "safety net" under them...
Our Big Safety Net, Plus a Great Trade Management Shortcut
The 10-Minute Millionaire system has a two-pronged money management strategy:
- We use stop losses (also called contingency exits) on each trade so we know when to exit a trade if it doesn't go as planned.
- We use proper position sizing so we don't risk too much capital on any one idea.
These are the big components of our system that form a safety net under our entire strategy. We'll dig more deeply into these key parts of the system in future articles.
But today I want to highlight another tool that allows us to evaluate individual trades in a subjective, unemotional way.
The secrets in this book helped one Money Morning reader make a $185,253 profit in just eight days. Learn how to claim your copy here…
When a trade is ambling along without much movement in our intended direction, it's natural (even healthy) to wonder if the trade is still working.
Acrobats are acutely aware of the location of their bodies in space, and they can tell right away if their timing is off and if they're likely to take a tumble to the big net below.
It's a little difficult to develop the same physical "sixth sense" for trading, but fortunately you don't need to...
I use many tools to help answer the important ongoing question of whether we should still be in a trade. Here are a few:
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
- Is the belief about why we got in the trade still applicable?
- Is the market narrative still supportive?
- Has this stock diverged from its sector or similar stocks?
That covers a lot of ground and takes a bit of time, so I also love to have a shortcut that helps me know whether a trade requires extra attention or is in cruise control for now.
That shortcut is our old friend and heavily used tool: support and resistance levels.
Cutting to the bottom line - if our trade respects the important support levels for a bullish trade or the important resistance levels for a bearish trade, then the trade is on track and requires no additional action.
With a trade that is in proper relation to its support or resistance zone, I can sleep well knowing that my original entry signal is still valid. All that I need to do then is give the trade time to work.
Here's an example from our position in Hudbay Minerals Inc. (NYSE: HBM). This stock has traded along with the rest of the minerals and mining sector, with the normal ups and downs currently associated with that sector. Here's the chart showing one of most consistently useful support/resistance tools that I employ - stock price reaction areas:
Adding in one of the most watched technical indicators - the 200-day moving average - adds to the importance of this support zone:
So the update on this trade is pretty simple: Our beliefs about this trade are the same, and with it continuing to bounce around above a key support zone, we should give the trade time to work.
It's an elegant routine - and a thrilling one.
Don't forget your cotton candy as you wait for the big payoff.
Shipping 500 Free Books Today – Claim Yours
With the secrets you'll find in this book, I've produced 89 chances to double, triple, and even quadruple your money in the past two and a half years – 42 chances this year alone!
Fun fact: You only have to double $500 eleven times to turn it into $1 million.
Click here to learn how you can claim your free copy today.
The post Here's Your Ticket to the "Greatest Little Trading Show on Earth" appeared first on 10-Minute Millionaire.
About the Author
D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.