Archives of “January 15, 2019” dayrss
A study conducted by UCLA’s Department of Psychiatry has revealed that the kind of face a woman finds attractive on a man can differ depending on where she is in her menstrual cycle. For example: if she is ovulating, she is attracted to men with rugged and masculine features. However, if she is menstruating or menopausal, she tends to be more attracted to a man with duct tape over his mouth and a spear lodged in his chest while he is on fire. No further studies are expected.
1) What goes up must come down and vice versa.
That’s Newton’s law, not the law of trading. And even if the market does eventully self-correct, you have no idea when it will happen. In short, there’s no point blowing up your account fighthing the tape.
2) You have to be smart to make money.
No, what you have to be is disciplined. If you want to be smart, write a book or teach at a university. If you want to make money, listen to what the market is telling you and trade to make money — not to be “right.”
3) Making money is hard.
Nope. Sorry. Making money is actually easy. Statistically, you’re going to do it about half the time. Keeping it, now that’s the hard part.
4) I have to have a high winning percentage to be profitable.
Not true. How often you are right on a trade is only half of the equation. The other half is how much do you make when you’re right and how much you lose when you’re wrong. You can remember that with this formula:
Probability (odds of it going up or down) x Magnitude (how much it goes up or down) = Profitability
5) To be successful, I have to trade without emotions.
That is both wrong and impossible. You are human so you have emotions. Emotions can be a powerful motivator to your trading.
When you feel angry or scared in trading, take that emotion and translate it into something more productive. For example, if you’re feeling angry because you just got run over by the market, view that anger as a reason to be more focused and disciplined in your entry and exit levels on the next trade.
Doing The Right Thing
The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itself if the other things are attended to. A trader gets to play the game as the professional billiard player does—that is, he looks far ahead instead of considering the particular shot before him. It gets to be an instinct to play for position.
You watch the market—that is, the course of prices as recorded by the tape—with one object: to determine the direction—that is, the price tendency. Prices, we know, will move either up or down according to the resistance they encounter. For purposes of easy explanation we will say that prices, like everything else, move along the line of least resistance. They will do whatever comes easiest, therefore they will go up if there is less resistance to an advance than to a decline; and vice versa.
- They trade a robust system or method that wins more money over time than it loses.
- Their system gives them a reward to risk ratio that is in their favor.
- Their system or method is proven to work with a live trading record over many markets and trades or has historical back testing.
Trading with Managed Risk
- They manage the risk of ruin to avoid blowing up their account.
- They risk no more than 1%-2% of total account equity on any one trade.
- They manage risk through proper position size so they do not risk their account and ability to trade int eh future on any one trade.
- They do not risk more than 6%-12% of their capital at one time across multiple trades.
The Mind of the Trader
- They have faith in their system or method and continue to trade it even when they are losing so they capture the wins when they start again.
- Almost all winning traders have come back from blowing up their accounts or losing a lot of money, they persevered while many others quit before they won. You will have to do the same if you do not understand the risk of ruin .
- Most winning traders have learned to separate their trading from their self worth and ego. They treat it like a business not an ego trip.
Your focus in your trading career should be like a laser on finding the right system & method, learning why it is so important to manage risk then doing it, and having the right mind set to stay disciplined, passionate, and focused to get into the winning circle. With these three elements incorporated into a trading plan you will eventually win big. If you are missing any one of these three elements in your trading the odds are that you will be out of the game quicklyeither after a string of losses, loss of faith in yourself or system, or loss of belief that winning at trading is even possible for you.