The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you you hope that every day will be the last day – and you lose more than you should had you not listened to hope to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out – too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.
I came out in fine shape. The newspapers said that Larry Livingston, the Boy Plunger, had made several millions. Well, I was worth over one million after the close of business that day. But my biggest winnings were not in dollars but in the intangibles: I had been right, I had looked ahead and followed a clear cut plan. I had learned what a man must do in order to make big money; I was permanently out of the gambler class; I had at least learned to trade intelligently in a big way. It was a day of days for me. (more…)
The major European stock indices are closing the day mostly lower. The exception is the UK’s FTSE 100 which saw gains on the day, but is all of its highs. The UK FTSE 100 was up 73.98 points at its peak. It is closing with the gain of around 29 points.
A look at the clothing levels it shows:
- German DAX, -0.46%
- France’s CAC -0.59%
- UK’s FTSE 100 +0.39%
- Spain’s Ibex -0.10%
- Italy’s FTSE MIB -0.5%
Looking at the hourly chart of the German DAX, the recent rallies have been able to find sellers well ahead of the following 100 hour moving average (blue line in the chart below). Stay below the 100 hour moving average currently at 14074 (with the current price at 13925.59), is more bearish in the short term with more work to do. The low from last week reached reached 13791.52. That is the next target followed by the 38.2% retracement of the move up from the September 29 low. The low comes in at 13602.86.
Once you’ve realised your error, you’ll be in a great position to correct it.
One tragic loss was all it took to send me to my knees.
Because of the magnitude of the loss, I stayed away from trading for close to two years.
During that time, I was able to reflect on my successes and failures as a trader and gain valuable insight.
Famous soybean trader Roy Longstreet once said, “Your first mistake educates but your second error kills,” and I’ve always found it to be an inspiring and instructive saying.
Many traders, in my opinion, assume that all they need is a run of good luck before they can move forward with confidence.
Is it possible to maintain composure while on the losing end of a trade?
My “confidence” has taken me through many ups and downs, but I’ve now realised that the key to success is not having more winning transactions than losing ones and being able to manage both.
I realised that my optimistic outlook on life was directly related to the way I dealt with disappointment.
I felt optimistic about my ability to recover from defeat.
If I lost more than I should have or went over my daily loss limit, I felt terrible about myself instantly.
So I stopped doing the things that had been giving me that unpleasant sensation.
While I may not be able to influence market conditions, I do have complete say over my individual trades, including when and how much I enter and exit the market, how many positions I hold at once, and how much risk I am willing to take.
Livermore (speaking through the fictional character of Larry Livingston) complains how he’s made a series of trading mistakes that cost him a lot of money, although he wasn’t completely wiped out. The losses, he admits, were painful but educational:
“There is nothing like losing all you have in the world for teaching you what not to do,” he says. “And when you know what not to do in order not to lose money, you begin to learn what to do in order to win.”
After going broke three times in less than two years, Livermore has this advice: “Being broke is a very efficient educational agency.” He says that you learn little from your winners because they often take care of themselves. It’s the losers that will teach you lessons to last a lifetime. And as long as you don’t make the same mistake twice, you always have the opportunity to trade another day.