HOLD'EM or FOLD'EM

I am sure most of you are very familiar with the famous Kenny Rogers song, “The Gambler”. If not, the lyrics go a little something like this:

“You gotta know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to run.”

Well, today in the MOJO Day Trading Room these lyrics came to life in real time, as we traded $ACRX on the open. Unfortunately for us, as soon as we entered this stock, things just did not go our way. The stock quickly dropped in value, making it readily apparent to the MOJO Traders that it was time to ‘fold ‘em’ and sell off the shares of this trade for a loss.

This is supposed to be a bad thing, right? WRONG! WRONG! WRONG! In fact, I have to say, that the ‘fold’ of $ACRX was my trade play of the day!

How do I figure?

Well, if you want to be a MOJO ProTrader, you have to value and respect a good fold. If not, you will never be a winning trader.

Think about it in terms of playing poker. Say you have a great hand and bet it strong on the flop and turn, but then on the river, your opponent who has previously just been calling, announces he is moving ALL IN over your bet for a huge raise. Unless you have the nuts, you have to lay down your hand. Simple as that. Every great poker player knows the value of a good fold. Having the ability to lay down a big hand, even when you are frustrated about getting unlucky, is the difference between the winners and losers. You can have all the talent in the world, but if you do not have the self-control and will power required to fold a big hand that is clearly beat, you will not profit in the long run. As the legendary Stu Ungar once said: Fold and live to fold again!

Just as in poker, in day trading, if you want to experience long term profitability, you must learn to mitigate your losses, whenever possible, by folding out bad trades, such as the $ACRX trade this morning. Because of the timing of our fold, we took a $0.10 loss rather than a $0.50 loss! Like Stu Ungar suggests, MOJO folded to live to fold again!

Having the ability to recognize when it is time to accept the loss and move onto other stocks is one of the most underrated parts of day trading. It is often overlooked, and hardly ever celebrated in the same way as a big score, but sometimes avoiding a big loss is even more important in the long run. For instance, when you fold out a bad trade, like we did with $ACRX, you give yourself the ability to cut losses, move on and put yourself in a position to make back that money on other, more profitable trades, like we did this morning with $UVXY and $AKBA. Take ProTrader Alan for example. This morning, $ACRX forced him into a hole, and he was worried about having his first losing day since last November. What did he do? He followed the MOJO System, traded out of $ACRX, avoided an additional $0.40 loss on that stock and put his money into $UVXY and $AKBA where he was able to make back his losses and then some, registering a winning day and keeping his streak alive! That man has some serious MOJO!