Simply stated, trading is a lot harder than it looks. You can study all the books, pay homage to all the market gurus, and still fail to profit when it’s time to risk your capital. Or someones elses capital – thats even worse. Ironically, mastering the most advanced trading strategies is the easiest part of your job. Applying those skills in a stomach-wrenching tape is far more difficult.
In reality, most traders crash and burn because of a lack of discipline rather than a lack of knowledge. Internalizing this single piece of wisdom will become your greatest obstacle in profiting from speculation
- Honor your stops. Stops force you to think about the price where you screwed up and need to get out of the market. In truth, every position will go where it wants to go, despite your best hopes and wishes. And even perfect trade setups will fail regularly for no good reason. The bottom line: Traders aren’t investors, so stop acting like one. 🙂 (Yes that’s something I need to stick to my head)
- Have a trading plan and follow it. What exactly are you trying to accomplish with the stock you sold short today? You’re in extreme danger if you don’t know the answer before you take the risk. So outline your strategy beforehand and then stick with it.
- Trade small, smaller and smallest. Leave big lots to the market professionals. Big risk blinds us to the big picture, because it becomes more important than the great pattern or setup we’re using to make money. Taking smaller positions gives you greater control over the time element. The failure to control the time element is the single biggest reason why traders lose money.
- Learn to hit singles before swinging for the fences. Forget your unrealistic profit goals and just concentrate on taking a few bucks out of the market each day. Want to know a secret? This one piece of advice builds discipline and profits faster than attending a dozen trading seminars .
Yup, those are the points I know very well but as realized today found uite hard to follow. Trading with my own money – I can take it easy. Once its on trading account – my money becomes something Virtual Something I dont own – for me. So seeing those red “loss” number getting bigger and bigger dont freak me out. But what I have learned – when someone trusts me his money to trade with I loose all my rationalism. I would become driven by success … trading smaller amounts?
Yeah right but if those small amounts profited me 70 dollars with just 30 minutes (while I was at my lunch break) – I automatically got driven by success and inserted multiple more deals – yes thats not the “bad point” yet. The big mistake happened when I stayed watching how it goes….
How did it went then…well at first nothing happened – that’s not what I was after, so I started bringin my buying prices closer and closer to where market was at that point -until “Purchase” got done and the options were bought….I had insrted my loss points according to the volatility of commodity I was trading with – but staring at those scary RED numbers indicating loss getting bigger and bigger I panicked.
I was loosing SOMEONES money – I had to stop it….and I sold position Before it reached my stop point – later having had look back to it – I should have not done it, cos BEFORE my stop-loss point reached the commodity index changed direction and would have brought me nice profit, if only I had not panicked and soled the position in order to cut the loss.
Well at one point after some time having cutting deals foolishly trying to save “the trade” I had lost half of the money I had put in. Would have been good point to stop for that day but I was too much desperate to earn the lost money back and give some nice “trading summary” in the end of the day so I did not stop. I continued. Until I had just 15 dollars left on the trading account. Thats when I relized there is nothing much that can be done.
I inserted some limit orders for night and went to sleep. That was one of the best decision I made yesterday as when I woke up some deals had closed at night and amount on trading account had grown to 35. Yeah I had some hope again – maybe everything is still not gone?
Well it was….cos again I stayed online staring at the numbers and lost everything.
What did I learn from all this?
1) Dont stare at the numbers, turst your stop-and loss points and relax.
2) Dont trade for someone. Its way much more scary and defeintely not worth the stress.
3) In whatever situation -WHATEVER situation, follow those damn point brought above ! Damn it!
moneymattersweb 