A good trade can lose money, and a bad trade can make money.
Even the best trading processes will lose a certain percentage of the time. There is no way of knowing a priori which individual trade will make money. As long as a trade adhered to a process with a positive edge, it is a good trade, regardless of whether it wins or loses because if similar trades are repeated multiple times, they will come out ahead. Conversely, a trade that is taken as a gamble is a bad trade regardless of whether it wins or loses because over time such trades will lose money.
Archives of “money” tag
rssThoughts About Traders and Trading
* Risk Management – If you lose 10% of your trading account, you need to make 11.1% on the remaining capital to get back to even. If you lose 20% of your account, you need to make 25% on the remaining capital to return to breakeven. At a 30% loss, you have to make 37.5% to become whole; at 40% loss, you have to make 67% to return to even. Once you’ve lost half your trading capital, you need to double the remainder to replenish your account. Much of trading success is limiting losses and avoiding those fat tails of risk.
* What is a Trader? – If you ask a trader what is a good market, he will tell you that it’s a market that has good volatility; a good market is one that moves. If you ask an investor what is a good market, he will tell you that it’s a rising market. Lots of people try to succeed as traders with the mindset of investors. It doesn’t work.
* Refutation – The story goes that Samuel Johnson, upon hearing Bishop Berkeley’s theory that objects existed in mind only, kicked a rock in front of him, announcing, “Thus I refute Berkeley!” The incident came to mind when I met with a trader today who trades very actively every day, has made money on more than 80% of days this year, and has made several million dollars this year. His performance was clearly documented by his firm and the firm’s risk manager. Thus he refutes efficient market theory.
* Success – When I see traders like the one above (quite a few at his firm are up more than a million dollars this year), it’s an inspiring reminder that success *is* possible to those who work diligently at trading as a career. The support of a superior firm doesn’t hurt, either.
Trading Wisdom Not Heard Often
- Buy from the scared, sell to the greedy.
- Buy their pain, not their gain.
- Successful traders are quick to change their minds and have little pride of opinion.
- I made my money because I always got out too soon. (Bernard Baruch)
- Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars. (Bernard Baruch)
- Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting. (Jesse Livermore)
- The faster a stock has climbed, the quicker it will fall.
- The more certain the crowd is, the surer it is to be wrong. (Menschel)
- Bear markets begin in good times. Bull markets begin in bad times
- Never confuse genius with a bull market.
- Always sell what shows you a loss and keep what shows you a profit
Dump The Loser!
I tend to lose patience very quickly whenever one of my trades stops trending. As soon as I get the signal, I will not hesitate to dump the loser. I don’t take it personally, it doesn’t affect me as long as I keep in mind that my money can be put to better use if I position it to take advantage of stocks that are trending. To me, it’s the fastest way that I know of to compound my capital.
Causes of psychological instability
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Trading Psychology Quotes
Anyone who claims to be intrigued by the “intellectual challenge of the markets” is not a trader. The markets are as intellectually challenging as a fistfight. Ultimately, trading is an exercise in self-mastery and endurance.
The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading.
Just remember, without discipline, a clear strategy, and a concise plan, the speculator will fall into all the emotional pitfalls of the market – jump from one stock to another, hold a losing position too long, and cut out of a winner too soon, for no reason other than fear of losing profit. Greed, Fear, Impatience, Ignorance, and Hope will all fight for mental dominance over the speculator. Then, after a few failures and catastrophes the speculator may become demoralised, depressed, despondent, and abandon the market and the chance to make a fortune from what the market has to offer. (more…)
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- Quit letting trades go through your original stop loss, you were wrong, get out. When you start hoping and stop managing your stops you are losing money.
- Quit over trading, only take the very best entries and trade the very best stocks in your system.
- Quit making up stories about why you decided to hold your position instead of taking your stop when it was hit. trade your plan.
- Stop trading your opinions and start trading what the price action is saying.
- Stop following people in social media that cause you to trade badly and lose money.
- Stop looking at BLUE Channels for trading and investing advice.
- Stop trading so big that you emotions are more involved in your trades than your mind.
- Disconnect your ego from your trading. You determine your risk size and entry the market chooses whether you win or lose.
- Quit riding an emotional roller coaster, your emotions should stay level when winning and losing. If not trade smaller.
- Quit buying falling knives and shorting rocket stocks, wait for confirmation and reversal before entering.
Technically Your’s
AnirudhSethiReport-Team/Baroda/India
So – you want to be a trader?
• In 1973 Larry Williams published a book titled “How I Made One Million Dollars Last Year Trading Commodities” detailing his trading success that year. The next year he lost the million dollars.
• Michael Marcus started with $30,000, borrowed another $20,000 from his mother and then proceeded to lose 84% of their combined capital (imagine trying explain that to your Mom) before becoming a successful trader.
• In 1987 several commodity funds managed by Richard Dennis lost 50% of their capital and were forced to stop trading.
It is the most competitive field out there, not only we have to fight each other (yes – this is what we do), but we have to oppose enormous computing power of heartless machines turning trades in nanoseconds.
Here is a simple test if you cut to be a trader – if you can stay emotions free when you finish it – try stock betting…just don’t bet your house on it – that was a job of banksters. (Just remember – 99% of you will be better of sticking with just a test and not moving to real trading)
Step 1. Go to your bank on a windy day.
Step 2. Withdraw a minimum of Rs10,0000 in cash.
Step 3. Walk outside and with both hands starting throwing your money up into the air.
Step 4. After all of the money has blown away, go home and sit down in your favorite chair and calmly say, “Gosh that was foolish. I wish I hadn’t done that.”
Step 5. Get on with your life.
Winning and Losing are Both Part of the Power of Probabilities
Winning, Losing, Money and Success are just a few of the many aspects of life that people use to determine the worth of others as well as themselves.
In reality, it is not these results, but how we respond to them that will make our journey one that we enjoy and desire to continue doing, or whether we quit.
As a trader, the understanding of probabilities and how to make them work for us instead of against us will provide great power for you as you move forward in your trading career.
Trading Mantra
There are some things we can control as traders and some things that we can not. We need to learn the difference to limit our frustration and win in this game. We can control: How much we risk per trade. How big a position size we take. What time frame we trade. What market we trade. Our style of trading. Whether we stick with our trading plan or go off of it. If we honor our stop losses and trailing stops. How we react to a winning or losing trade.We can not control: Whip saws when the trend reverses on us. Gaps in opening prices both up and down. Headline risk. Natural disasters. Whether a trend continues or reverses the moment we open a position. Whether any individual trade wins or loses. How many winning or losing trades we have in a row. The battle for your long term trading success is won or loss in your head. The decision to whether keep going after losing money or to quit is made at the point of maximum frustration with the markets. To keep going you have to keep positive, and keep trading. Knowing the difference between you making a mistake or the market simple not matching your style will go a long way in keeping down your stress and negative self talk. |