Professional Traders use Limit Orders and Stop/Loss Orders as the cornerstone of a disciplined trading strategy. By setting both on all their positions, they have removed emotion from the equation and are letting the market work for them.
Amateurs, on the other hand, don’t use Limit Orders and Stop/Loss Orders. They stay glued to their screens, trying to juggle all their positions in real time. They miss critical action points, and they let emotion rule their decisions.
Beware of Psychological Pitfalls
Many traders take shopping more seriously than trading. Few people would spend $500 without carefully researching and examining a product. But many traders take positions that cost them well over $500 based on little more than a hunch.
This cannot be stressed enough. Most traders fail because they lack discipline. Be sure that you have a plan in place before you start to trade. Your analysis should include the potential downside as well as the expected upside. So for every position you take, you should place both a Limit Order and a Stop/Loss Order.