Profitable ETF Trading Strategies: feed the bulldog every day
In order to build up your emotional and financial bank accounts during the day, short-term traders should consider the technique of “feeding the bulldog” and making this a primary objective of each trading day.
There is an old saying to the effect that “talking doesn’t feed the bulldog”. This is a colorful way of saying that results from cashing winning trades are the only way to grow your account objectively. You must be able to cash winning trades when the time is right in order to have the money to fund future trading operations and meet your financial goals.
“Feeding the bulldog” means taking care of business when it’s time to exit the trade. When you exit to feed the whole block, you take on the persona of a thick-skinned experienced, practical survivor of the trading game. You are taking a professional profit in order to lock in the gains.
Here is an example of how you can use that mindset of “feeding the bulldog” to meet your daily profit target objectives and yet stay very active when you are in tune with the market and on your way to a great trading day.
Consider a trader who is willing to risk up to $1000 a day with a unit of risk being normally $250 and who is capable of managing up to four simultaneous positions and remain within the span of control. This means that the trader could have four open positions with the maximum $250 of risk per position when fully committed to the market. It would be normal for all four of these positions going in the same direction as part of the major theme of the day. It’s not impossible, though, for one or two of those positions to be going against the market in an area of weakness in the form of a pair trade.
This trader’s rule about feeding the bulldog is operationalized at $500 gain per day. What that means is that the first $500 for profit must go into the bank. This money is not available to work additional trading the rest of the day. For the trader to engage new positions he must cash one of the other trades that are still open and use the profits as a means of funding additional positions. A very good first trade may end up feeding the bulldog. This would mean the open profits of three other trades to be available for your wedding or taking on new positions.
This mindset acts slow you down on days when you think you really have it going on, but it also reinforces the discipline of making positive gains every day as a primary objective of your short-term trading.
It makes you consider very carefully the quality of your open positions compared to the enthusiasm you feel for the next trading idea. By forcing you to choose, it keeps you focused on your best profit opportunity
These parameters suggested in this article are simply to illustrate the point. To adopt this mindset for your own trading would require you to know yourself and your risk parameters and would incorporate information about your trading capital and risk appetite.
Feeding the bulldog every day can add discipline and professionalism to your daily trading practice.