Tradestation Automated Exit Strategies – Overcome Emotional Trading

All TradeStation traders today have heard about the golden rule of trading, which is to cut your losses quickly and let your profits run. Even though we’ve all heard this sage wisdom, it’s been proven that the normal human behavior is to do just the opposite. Most traders want to ring the cash register as soon as they start getting into profits and will jump out of a winning trade way too soon. On the other hand, most traders don’t want to be wrong about the trades they picked, so they will hold on to losing trades hoping they will turn around and become winners. In essence, the typical human behavior in trading is to cut profits too short and let losses build up to be big ones. Obviously that’s a disaster for a trading account, but it’s why automated exit strategies can be very useful for a TradeStation trader.

With automated exit strategies a trader can use his time and expertise in making the initial trade entries, and then let an automated exit strategy take over the exit management. This accomplishes 2 things:

First, to be successful, TradeStation traders must overcome the natural human tendency of holding their losing trades. Good stop loss management is the risk management aspect that you need in order to overcome this emotional reaction. By putting a stop loss in place you will be protected against large adverse price movements and from holding losing trades too long, which results in excessively large losses. An automated exit strategy is unemotional and will perfectly execute your stop loss exit.

Secondly, the trader’s natural human tendency to take profits too quickly is a major problem that limits a trader’s profits. This emotional reaction results in overly short holding times and small trading profits. By using an automated exit strategy, the exit management is non emotional and is carried out without cutting profits short. This frees the trader to be involved in making more entries while the exit process is elegantly handled for them.

To be a successful trader, you need to overcome the human tendency to make reactionary trading decisions. Automated exit strategies are a great tool for TradeStation traders that have not yet conquered the emotional issues that come up while trading. Using automated exit strategies will free your mind to pick great trade entries while your exits are logically managed following good exit management rules.