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Even the greatest trade can be destroyed by horrible luck

  
Analysis, Education
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The tale of André-François Raffray


Bad luck is as old as humanity. Any casual historian can tell you of dozens of turning points in history that were battles won by pure luck.
Even the bible underscores luck in Ecclesiastes 9:11:

I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.

Here is a man who had time and chance both work against him. (more…)

Quotes from Larry Hite – Trend Following Legend

  
  Education
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Larry Hite is a famous Trend follower. Lawrence Hite co-founded Mint Investments in 1981. By 1990, Mint had become the largest Commodity Trading Advisor in the world in terms of assets under management.

I suggest strongly you enter the ideas below into your trading psyche.

No matter what information you have, no matter what you are doing, you can be wrong.

One of the great things about the market is, the markets don’t care about you. The market doesn’t care what color you are. The markets don’t care if you are short or tall. They don’t care about anything. They don’t care whether you leave or stay.

The beautiful thing about the markets, they don’t like you, they don’t dislike you, they just don’t care. They are there everyday. You want to play, you can play. You don’t want to play, don’t play.

We approach markets backwards. The first thing we ask is not what can we make, but how much can we lose. We play a defensive game.

There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future, when the odds will be running against you. You can also lose a good bet, no matter how sound the underlying proposition, but if you keep placing good bets, over time, the law of averages will be working for you.

Dealing With Losses

  
  Education
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A few quick caveats:

  1. There is no place for denial in successful investing.
  2. Don’t blame your losses on bad luck or outside manipulators.  Accept the responsibility yourself.
  3. Don’t be dependent upon trading for all your fulfillment and happiness.
  4. Focus on opportunities, not on regrets.
  5. Proper risk control and discipline is non-negotiable for every trade everyday.
  6. Revenge trading – trying to make back a loss – carries with it far too much emotion and is always costly.
  7. Poor money management skills are the number one reason that novice traders wash out.
  8. Learn to recognize your impulsive state of mind and take action to stop it.

Even the best traders in the world book small losses on a regular basis.  If you manage your emotions with consistency and if you strive for a disciplined trading mindset, then you should have no problem surviving a string of bad trades and showing profits at the end of the year.

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