- Actual winning/losing of a trade is unimportant.
- Each well executed trade, win or lose, is a victory.
- Each poorly executed trade is a defeat (even if you make money).
- Each move or action lacking discipline can eventually cost much more money than the original trade in the form of monetary/emotional loss.
Archives of “Lose” tagrss
I’ve noticed that my trading is more and more characterised by periods of doing a lot of trading, followed by periods of doing nothing except watching.
This seems to be a positive thing, as the old days consisted of trading every day no matter what the conditions, where as now I find that the markets will go into a mode that I just do not like the look of. In such cases if I try to force something, to “find a trade”, then I’ll get burned for sure.
To some degree I think this is because I have not yet spent much time on developing my strategies for trading insides large consolidation patterns. Of course it gets easier as they become more developed but by that time they are also getting old, and in the past I start making good trades in them just as they are about to end. The hard parts to trade are the start of trends / end of consolidation, and the end of trends / start of consolidation. These are times when the market is changing its basic mode, and are great places to lose money.
Because they would rather lose money than admit they’re wrong. What is the ultimate rationalization of a trader in a losing position? “I’ll get out when I’m even.” Why is getting out even so important? Because it protects the ego. I became a winning trader when I was able to say, “To hell with my ego, making money is more important.”
Whether you win or lose, you are responsible for your own results. Even if you lost on your broker’s tip, an advisory service recommendation, or a bad signal from the system you bought, you are responsible because you made the decision to listen and act. I have never met a successful trader who blamed others for his losses.
- Plan your trades, trade your plan.
- Trade Quality, Not Quantity.
- Keep it simple.
- Don’t look for a reason to enter the market, look for a reason NOT to enter.
- Don’t act due to “Newbie Nerves”
- Don’t make up a trade. If you have to look, it isn’t there.
- Never play with scared money.
- You are not the market.
- Buy dips in an uptrend, sell rallies in a downtrend.
- Do not try to pick tops and bottoms.
- It is only divergence if it came off a retracement – not a sideways market.
- Indicators warn, price action confirms.
- Divergence is early, cross-overs are late.
- You cannot expect your positions to go immediately into the money.
- Divergence means a detour, but not necessarily a new trend.
- No-one knows what will happen in the markets.
- Standing aside is a position.
- Subordinate your will to the will of the market.
- Large ranges beget small ranges, small ranges beget large ranges.
- Once a thing is set in motion, it tends to stay in motion.
- Sniper-rifle, not a shotgun.
- Cut your losses short, let your profits run.
- Only move stops in the direction of your position.
- Do not let a winner turn into a loser.
- Never add to a losing position.
- Forget losses quickly. Forget profits even quicker.
- Consistent behavior equals consistent results.
There are probably more, send ’em in…
There is one big difference between traders, who make money and traders who don’t. It is called risk management. Even if you blindly pick your stocks, in the long-term you will make money as long as you cut your losses short. Add to risk management a proper equity selection model and then you are in top 5% in the world. The 5% that actually make money, consistently. This is the biggest secret of successful traders – cutting losses short. It saves capital and it saves your piece of mind.
If you browse on the internet, you will find thousands of articles that preach that losses should be cut short. It is well known fact and yet you’ll be surprised how few people actually utilize it, even those who write about it. Words are free. You can say whatever you want. Many people don’t practice what they preach and this is why the biggest edge someone could have is called discipline.
There are two types of traders: the ones that cut losses short and the ones that lose everything and go out of business. If you can’t define your risk in advance and most importantly if you can’t accept it, you should not be trading at all. Reading about cutting losses short will never be enough. It is human to believe that you are different and that you know better and that it will never happen to you. You have to experience it to realize it. It is part of the learning curve. I knew about this rule long before I committed serious money to trading and yet I didn’t practice it until I had my portion of outsized losses. Today, the thought of how and where I’ll exit a trade, is the most important.
I know that there are many people who preach that they don’t use stop losses and yet they are successful. Well, if they are successful doing that, then they are not really traders. They are investors and they limit their risk by hedging, which is a whole new chapter.