20 Ways To Stop Losing Money

[hedgehog]

This is good for general trading, not specific to FX but rules are just the same.

Here's a reality check as we slam headfirst into the January markets. The vast majority of retail traders lost money in 2007 and will lose money next year, despite ample doses of education, enthusiasm and brilliant ideas. In fact, at least 80% of all at-home speculators will eventually give up and wash out of the financial markets.

How can you buck this enormous tide and make 2008 your most profitable year in the trading game? To state the obvious, the best way to start making money is to stop losing it.

In that regard, here are 20 ways to staunch the bleeding and get back into the winner's circle in the new year. Happy holidays, everyone!

1. Don't trust the opinions of market gurus. Remember that it's your money at stake, not theirs. Listen to what they say, then step back and do your own homework.
2. Don't believe in a company. Trading isn't investing, so you need to focus on the price action and forget the balance sheets. Leave the American Dream to Warren Buffett.
3. Don't break your entry and exit rules. You made them for bad trades, just like the one you're stuck in right now.
4. Don't try to get even. This isn't a game of catch-up. Every action you make has to stand on its own merits. Take your losses with detachment and make your next trade with absolute discipline.
5. Don't trade over your head. If your last name isn't Kass or Cramer, stop trading like them. Just concentrate on playing the game well, and stop thinking about making money.
6. Don't seek the Holy Grail. There is no secret trading formula, other than good position choice and solid risk management. So why are you looking for it?
7. Don't forget your discipline. Anyone can learn the basics of the trading game. Sadly, most of us will fail because of a lack of self-control, not a lack of knowledge.
8. Don't chase the crowd. Tune out the groupthink and dance to the beat of your own drummer. Get out of the chat rooms and off the stock boards. This is serious business.
9. Don't trade the obvious. Everyone sees the most perfect-looking patterns, which is why they set up the most painful losses. Simply stated, if it looks too good to be true, it probably is.
10. Don't ignore the warning signs. Big losses rarely come without warning. Don't wait for a lifeboat before you abandon a sinking ship.
11. Don't count your chickens. That delicious profit isn't yours until you close out the trade. Trail stops, take blind exits and do everything possible to get that money into your pocket.
12. Don't forget the plan. Remember the reasons you took a trade in the first place, and don't get blinded by greed or fear when the position finally starts to move.
13. Don't have a paycheck mentality. You don't need to get paid every week or every month, as long as you take advantage of the opportunities as they come. Classic wisdom: traders book 80% of their profits on just 20% of the days the market is open for business.
14. Don't cut corners. There are very smart folks out there working full time to take advantage of your mistakes. Fight back by examining your results, updating your plan and finding working themes for the next session.
15. Don't ignore your intuition. Listen to that calm little voice that tells you what to do and what to avoid. That's the voice of the winner trying to get into your thick head.
16. Don't hate losing. The best traders lose money on most of their positions, so get used to the pain of losing. And there's a side benefit: the losing teaches more about winning than the winning itself.
17. Don't fall into the complexity trap. Traders who can't see the market are looking for it everywhere except in the price action. In truth, a well-trained eye will find more profits than in a stack of technical indicators.
18. Don't confuse execution with opportunity. Expensive software won't help you trade like a hedge fund. Pretty colors and flashing lights make you a more nervous trader, not a better one.
19. Don't project your personal life onto your trading. Trading gives you the perfect opportunity to find out just how messed up your life really is. Get your own house in order before you play the financial markets.
20. Don't think that trading is fun. The trading game should be boring the vast majority of the time, just like the real-life job you have right now.

(Source: Right Hard Edge)

-edited for better Readings K

[chrisbenjy]

I agree with all of these except number 20. I find it fun and that is what gives me the determination to try to succeed in the trading markets.

That delicious profit isn't yours until you close out the trade

I agree with this. But also, profit isn't yours until it is withdrawn. If the money is still in your trading account then it is still at risk and is just capital.

[hedgehog]

But George Soros was quoted the following

"If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring."

And after many years as a stockbroker and investment manager, I tend to agree.

[chrisbenjy]

I guess it's just one opinion. But I would not think of trading as a chore. I think of it as challenging and stressful, but on the whole I still enjoy it.

I take the emotion out of it when I make decisions though, but I enjoy analysing charts and interpreting economic releases.

[Roels Major]

Not to trade anymore.....how is gonna be....you still losing your money......

[Chowblower]

Good post. It's all true

[superdata77]

Thanks for your great sharing

[conglo]

How to make a small fortune trading forex-

start with a large fortune

[Gott]

Don't seek the Holy Grail.

seems to be really easy. but unfortunately not

[tommy0921]

Thanks for sharing those great advices.
I've just jumped in to Forex Trading field 2 weeks ago on fxdialogue. So far I'm still on the learning process so your advices really help me. I appreciate it. To sum up, it's like the way Warren Buffett did. People think that Warren Buffett always takes high risk investment. However, he said "It's not risk when I know what I'm doing" (I think his viewpoint can apply to forex). I think we've better to know deeply before we invest to keep low risk. Take 100% responsible to what we are investing. Do "homework" and refuse to listen to "hot tips" which are normally showed not in the way as the reality is. No one care about your money as you do.