Money management keeps them in the game of trading. It is a game and there are winners and losers. The vast majority are losers. More than 90%! Once traders realize they need an exact plan…traders retool their approach, once they analyzed their trading system with money management concepts. Money management keeps traders …trading…
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts, commodity options or forex can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results. You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.
2)The challenge is not to be the market, but to read the market. Riding the wave is much more rewarding than being hit by it.
3)Trade with the trends, rather than trying to pick tops and bottoms.
4)There are at least three types of markets: up trending, range bound, and down. Have different trading strategies for each.
5)In uptrends, buy the dips ;in downtrends, sell bounces.
6)In a Bull market, never sell a dull market, in Bear market, never buy a dull market.
7)Up market and down market patterns are ALWAYS present, merely one is more dominant. In an up market, for example, it is very easy to take sell signal after sell signal, only to be stopped out time and again. Select trades with the trend.
8)A buy signal that fails is a sell signal. A sell signal that fails is a buy signal. (more…)
Never add too a losing trade. In adding to a losing trade you are already wrong but now become more wrong with a bigger trading size. Adding to losers makes you a counter trend trader that usually ends badly.
Never lose more than 1% to 2% of your trading capital on any one trade. This means use position sizing and stop losses so when you are wrong the loss is not a big deal.
Never trade anything you do not understand 100%. Stay away from trading futures, forex, or options until you understand the risk and how exactly they work.
Always trade with the trend in your own time frame.
Only look for low risk, high reward, high probability setups , when there is nothing to trade, trade nothing.
Trade the chart and price action, not your own opinions or predictions.
You have to trade your own way, the trading style that you are comfortable with that fits you.
If you do not have a full trading plan with rules on entries, exits and risk management stop trading until you create one.
The size of your wins and losses ultimately determine your trading success regardless of your winning percentage.
Your risk management rules will ultimately determine the success of your technical trading system.
There are some magical numbers and sequences of numbers that have their prints in the nature. They were there in the first place because God who created the whole universe encoded them just like His signature or autograph. Now, we might wonder, why is these magical numbers so important in our discovering of the secrets of the stock market trading and investing business? The simple and quick answer to that question is that these numbers resonate and vibrate in the stock markets, commodity markets and forex just as they are found in the universe that we live in. This is true for any financial markets. Before you discredit my claim of the magical number pi (π) and its application in making money in financial markets, take a good look of Fibonacci. This magical sequence of numbers of Fibonacci that starts from 1, 1, 2, 3, 5, 8, 13, 21, and etc, had been a very good technical indicator of when (time) and where (price) should the index futures reverses its trend. The number of pi (π) is so magical that its decimal portion is unique and there is no repetition of patterns. Just in case that some of you wonder what pi (π) is, it is a constant number where pi π = 3.1415926535897932384626433832795… The study of market cycles and market geometry uses pi (π) to pin-point the exact reversal date and price for stock markets and other financial markets. Here I present to you a video that sings out the magical number of pi (π).
When you have experienced successive losses, you should quit trading for a day. Some traders even have a “punishment” that is assumed by a trading plan: had loss, no trading for a week! Market will not disappear and tomorrow have even more opportunities for you. Do not do anger trades, just take a breath and give yourself a break.
2. Shorten Size
Shorten the size of amount traded considerably. In such a way you will be able to distract your mind of trading for a while and become sensible again. Give yourself time and get back to the right size trading only when you are really ready.
3. Add Money You Didn’t Win
Put the amount equal to the winning trade you didn’t take in your forex account. When you see money in your account, it will make you feel better and take wise decisions.
4. Add Amount You Lost
If you experienced a loss, you can add to the amount you have lost back to the account. You will be surprised at how easy it can become normal again when you do not see your account with losses.
5. Use Visual Effects!
Create a poster or make a note which can remind you of not making unreasonable decisions after bad trades. The note will help you to stay sensible and take only the trades that you can completely understand and pass on all the rest.
6. Trade With Reason
Psychology is a critical factor that influences success or failure in trading. You should have the right psychological reasons to do trades.
7. Be Precise
You should be disciplined. Actually, you should become army disciplined. Bear in mind that emotions should have nothing to do with your decision taken as for the trades.
8. Confess and Talk It All Out
Confess about your losses to somebody nearby or even over the internet, a fellow trader or somebody who can understand your pain. Talking will free your mind from negative thoughts and will bring you back to real life.
Here’s a great video about trading psychology, even though it’s not directly about the stock market, futures or Forex, and doesn’t reveal any day trading tips. But it does contain a secret most traders are violating every day.
Trading is a great business. I love it, I’m passionate about it, and it is so much fun that I’d do it even if there were no money involved.
But it’s not just me. We traders are a passionate bunch.
We spend a LOT of time reading, studying, trying different indicators, tweaking indicators, testing various strategies and looking at chart after chart after chart.
And then you add the money factor – and well, we can get to be a bit obsessive (just ask any trader’s spouse!).
Work ethic is good, and it does take a certain amount of experience in the markets to become successful. The problem arises when you take things TOO seriously. That causes a block of your mental and emotional energy. And in extreme cases, it can have negative consequences in the rest of your life.
This video isn’t about trading. It’s about life. And therefore, it is about trading.
Enjoy, and leave a comment below with your reaction to the video.