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The Secret Of (Old and New) Pros

07/28/00 09:29:32 AM
by George Kleinman

Trading secret of the pros: Have a plan before you trade -- Then work it!

"It is literally true millions come easier to a trader after he knows how to trade, than hundreds did in the days of his ignorance" - Jesse Livermore, 1923

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I have been trading futures, options and stocks for more than 20 years. The 'secret' I plan to share with you is from experience and also in part gleaned from reading the masters, including Jesse Livermore and W.D. Gann. The same mistakes made 50 and 100 years ago continue to be made by investors and traders every day. Technology may change, but human nature never does.

The secret: Have a plan before you trade -- Then work it!
If you have a plan and follow it, you avoid the emotionalism that is the major enemy of the trader. During the heat of the session, stay calm and remain focused. To do this, you have to be totally organized prior to the opening bell. Your daily mission is to make money each day, or barring this, at least not lose too much. In normal markets, you should take normal profits. In those unusual markets, which occur rarely, you need to go for abnormal profits. This is one of the keys to success. ALWAYS LIMIT LOSSES ON TRADES WHICH ARE NOT GOING ACCORDING TO PLAN. This takes willpower and is as essential a quality as having plenty of money. In fact, it is more important than having money. If big risks are required, don't take that trade. Wait for an opportunity where you can place a tighter stop. For example Jesse Livermore used to look for opportunities where he could enter very close to his risk point. In this way his risk per trade was small in relation to the profit potential.

If you do not have the willpower to take the loss when your risk point is hit during the trading session, then you must use stop-loss orders. Place the stop at the same time you place the trade. You have probably heard stories about floor traders 'running the stops', but I assure you, in the good trades, the majority of the time you will not be stopped out. This happens only with the bad ones.

Personally, I lay out a trading plan the night before. I know what I will do if the market acts the way I anticipate it should, and just as important, what I'll do if it doesn't. My plan is a guide, not written in stone, and somewhat flexible. However, if a market does not act according to my plan, I know it is time to take action, either to take the profit if available, or cut the loss if not. Generally, I've found when I try to deviate from the plan I live to regret it. Not always, (and this why it's hard to follow a plan) but enough to know that, in the heat of the battle, the plan is smarter than I am.

When it's not going right, or when in doubt -- get out. If you have a compass in the middle of the desert, and the oasis is north, don't get fooled into following the mirage to the west. There is nothing better than getting out quickly when you're wrong! For more 'Secrets of the Pros' visit my website at

George Kleinman

Veteran commodity trader with more than 20 years of experience. He is also the founder of and author of the book, "Mastering Commodity Futures & Options."

Address: 9310 Prototype Dr.
Reno, NV 89511
Phone # for sales: 800 655 4755
Fax: 775 853 9099
E-mail address:

Traders' Resource Links
'Futures Market Forecaster' with Daily Updates -- Advisory Services
Commodity Resource Corp. -- Brokerages

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