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having a plan and follow the plan is a must for success, but getting confidence and trust in trading is only possible with a good, a very good plan, so the question is how to get to a good method and plan?
Thx
The classic advice to avoid losing is "Cut your losers early and let your winners run".
Great advice, but very easy to say and very difficult to achieve consistently day after day.
Anyone manually trading and watching the charts has a good feel of how the market is moving (particularly if you regularly flip through different timeframe views to see price from different perspectives). I've found that by being attuned to the market in this way that I have a "gut feel" when I've made a bad trade - and it always turns out to be at exactly that point where it would have been best to take a small loss rather than let it grow into a much bigger one.
Another thing to do is to sit on your hands before placing a trade with the trend - wait for that retracement which always happens at some point. Getting in at a better entry point minmises your risk if the direction turns suddenly.
As for letting your profits run, the best thing to do is to establish your target (and don't be greedy - use classic support/resistance levels etc. as targets). Once the target is set then walk away. If you're "baby sitting" winning trades, the temptation can be great to take profits as soon as there's a small move against you, even when you're nowhere near your carefully calculated target!
Losing is all down to the psychology of fear and greed. Another classic is trading with "scared money" (i.e. cash you're going need, rather than can afford to lose), this causes traders to do the opposite of the "Cut your losers early and let your winners run" adage. They can't afford to lose the money, so they let losing trades run longer hoping they'll "come back", plus any trades which are in profit, the profits are grabbed very quickly for fear of losing it again or even the trade turning into a loss.
Believe that you're a winner and you'll become a winner, believe that you're a loser and you'll become a loser.
trading to win goes against logic ......... only few manage to go against that logic.
Let's say you start your account with usd 1000 and have a logical 50/50 odds. a winning trade of 10% of your usd 1000 is usd 100, but a losing trade after that of 10% of your usd 1100 is usd 110.
If you lose first then win then when u lose 10% of your balance, u end up with usd 900, but when u regain that 10% .. it's only usd 90.
Gambling odds with the spreads is around 47/53, means 47% of the time you'll win and 53% of the time you'll lose. and every time you lose and win a trade of 10%, you will still lose 1% of your balance.
to make a profit you actually need to have a consistent 3 wins out of 5 trades. The gambling odds of someone winning 3 trades out of 5 is close to 25% if you ask me.
And to do that all the time, you have to have something up your sleeves which i think only 5% of traders have what it takes.
Since it's long term.... if your target is 500 trades a year, then hopefully you can work towards getting 300 winning trades and not burn your account with a losing streak before that. On the positive side, i think people get better through time and experience. Happy trading
Example of high risk trading plan :
Initial deposit USD31 million (borrow from some loan shark)
leverage 1:200
1st trade : USD 1 million (buy a 200million lot) TP 50pips and SL 50pips
(47% chances you will profit 1 million and 53% you will lose 1 million)
let's say u lose the 1st trade :
2nd trade : USD 2 million (buy 2 lots) TP 50pips and SL 50pips
(71.91% chance you will profit 1 million and 28.09% you will lose 3 million)
let's say u lose the 2nd trade also :
3rd trade : USD 4 million (buy 4 lots) TP 50pips and SL 50pips
(85.11% chance you will profit 1 million and 14.89% you will lose 7 million)
ok you lose the 3rd trade also :
4th trade : 8 mil (8lots) TP and SL 50 pips
(92.11% you profit 1 mil and 7.89% you will lose 15 mil)
well u lose it also :
5th trade : 16 mil (16 lots) TP and SL 50 pips
(95.82% you will profit 1 mil and 4.18% you will lose 31 mil)
hehe....... so there's a 95.82% chance you'll be a millionaire and retire put the money in the bank after winning USD 1 million and returning the 31 mil you borrowed from loan sharks with 5 trades and 4.18% you will be owing loan sharks 31 mil and running away from them.
Greed to get more and more profit and fear not to lose what you have alreaady earn.
I've watch an interview with a guy who make about 500 000 profit from 50 000 in about 3 months. He basically said. I am thinking that I am trading on a demo account to keep himself calm and relax
Let's say that every morning i throw a coin to place a trade. 1 pip is the spread and i place 100 pip TP and 100 pip SL and i go for 1% of my account. I give the orders and i close the computer till the next morning. We must all agree that with that system, my account will be here after 6 months( perhaps with a little up or down), but 80/90% of all new accounts will be at zero.
How can be explained that we lose, although the odds are 50/50(throwing a coin), although we have a bunch of indicators to help us with our choices(not just simple throwing the coin)?
It is not a zero sum game if you also take into account the spread. People lose because they come into the game not well-prepared but with unrealistic expectations.
Trading is mostly a psychological game - traders with the same methodology - some will win many will lose. Once the basics are grasped and the mechanics are learnt - after that it is a mental thing
learn from Alexander Elder 3M ....Mind , Money Management, Method....the big portion to be success in Trading is Mind and Money Management. Stick max 2-3%/trade.
I think the tradrs lose because the psicology... the greed and risck... when you have a position in +++ you close it because you are afraid not to loss what you've got, but when it goes in --- you hope that it will turn into a profitable position... there are a lot of causes the traders lose
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