This is a long article but I am convinced if you give it the time of day you may take something from it that can help you on your search to success.
Plogy. . .Now theres a word I did not take seriously when I heard it... I thought to myself I am effective at what ever I attempt to do, this must be a warning to the masses, a warning to your everyday Joe, but not me I am smarter than that...
Well naturally I got a fast fact check... I entered transactions that were perfect and got stopped out for no reason besides that's just exactly what the markets do... I then tried to re-enter and win my cash again I got stopped out... Wow my platform must be wrong right?
Incorrect!!! It is merely the markets, they don't behave for us, we don't have a crystal ball, we just have an idea, an advantage and we play with the probabilities.
I did not know this, so I started my search to finding the perfect system... That elusive 100% system that never fails... a few started really well and I thought I was there, I'd cracked it... then you guest it a few losing trades later and I was back on this journey to find the perfect system. A few more attempts at this and eventually the penny dropped... Perhaps it's not the system... Perhaps it's me... mmm am I giving myself enough time to allow a system work? Could it be that every single system on earth will lose at some point? Can I make it worse by chopping and changing systems? How about the revenge trading... Does that add to my problems? Certainly it can not be me......
Recognize that story... I'd feel that 7 out of 10 people reading this can and if they don't then in case they don't take note will experience this...
See the point I am attempting to make is that the markets don't do what we say and to think that we may control them is simply ridiculous. This is a stage that we must know as traders. We must know that we just have a border in the form of a platform and just like a casino we will have losing hands but as long as we've got Money Management and sufficient discipline to keep in the game then in the long term we will flourish.
It is okay to sayâ€yes I understand†but knowing is not enough, you must have this... Just you do will you have the opportunity to live all of your dre...
So just how do you do so...?
I have a few measures that have assisted me and am sure can help you also...
1: Back test your system and forward test your system...
there are lots of reasons for this but all of those reasons culminate in one huge emotional breakthrough that's Confidence. You see once you test your system you are going to learn a lot of things on your system that will help peruse your own dream.
You may learn that you do shed, and sometimes have a losing streak. You'll also learn that at the end of the testing period you came out in profit. Imagine that you had a losing series yet you still were able to win.
You'll also have something to measure your own performance , you'll have statistics telling you exactly what your typical winning series should be, what your typical losing series ought to be, how many pips you ought to be making on average. If you deviate from this then you know that you have to sit down and re-assess things... know why your live performance differs from testing one.
Two: Keep Trading Records
Today this sounds simple... but how many of you may actually do it... how many will note down each one of the winners? My guess isn't many, but the people who do will accelerate their learning exponentially.
By keeping trading documents you can go back to both winning and losing times and see exactly what you did and exactly what you felt on those days. You may then learn from the losing days, you can know if it was negative feelings that caused you to shut early, perhaps you're a technical trader and you did not observe an important longer tern degree, or perhaps you missed your entry but because you watched the momentum at the market you desired a piece of it ended up leaping directly at the top and getting stopped out.
About the winning transactions you can both learn from... you can see that when you followed your trading plan to a tee you were successful, you can observe that by departing the missed entry and waiting for another signal you saved yourself by getting burnt.
The fact is that we can not see into the future but it's helpful to check into our own past and see exactly what it was that we felt, experienced and did on the times that we were powerful and the times that we were not so successful. We can then learn from this.
3: Have a Trading Plan and Stick to it (Discipline)
Here is something that is thrown around quite loosely on the market but I doubt lots of follow one just... I am prepared to bet that there are a lot of traders out there who have a Trading Plan however few follow it.
The fact is you can do this when you're not trading... you may devise a plan and it will all seem great. Then the moment you sit down to your computer you forget you ever made one because the excitement is now kicking in... The markets are moving and you begin to find opportunities... Your trading plan asserts wait for a confirmed signal but you think well if I wait any longer then I am gont miss this move and you input... 10 minutes later you get stopped out. Wow my trading plan would have saved me against that...
Or you enter a trade according to your principles but the markets have suddenly gone rancid and the motion isn't any longer... mmm you've 4 pips profit, you take it off the table as you're scared of dropping your profits... an 1 hour later the market shoots off in your primary direction along with your initial signal was correct... If only you had stayed in...
You notice many will argue that occasionally you want to get in early to ch the majority of the movement, or even occasionally you must leave early cos you may of ended up dropping....
The key is the wordâ€occasionallyâ€, I concur occasionally you would be right but by doing this and not following your plan you're giving back your advantage. You are just gaming... you may too throw a coin.
Having a trading plan also can help you overcome the emotions of trading and provides you discipline... you see if you know precisely what to do in the event of Y or X and you've documented this in a plan at a time when you weren't mesmerised by the markets and you were thinking logically... then suddenly the voice of reason may put in your trading. Suddenly it is not your choice when to enter or when to depart... You don't have a say... Your trading plan is the boss and you just execute a trade as your boss tells you... nothing more nothing less.
4: Money Management
This sounds really simple yet very few such as myself take any notice of this in the beginning. I will give you an example...
When I came into trading I heard concerning the Non-Farm Payrolls and I thought what a fantastic opportunity to make some money... Spend one Friday a month in the front of the computer for half an hour and make nearly enough money to completely pay your bills and live before the next Non-Farm... It could not be easier...
So I got some cash together... it wasn't everything I owned, it wasn't even a trading fund it was only me saying my broker needs at least 50 occasions my pip worth to allow me to put a transaction on the Non Farms so that's precisely how much I will place on... No thinking about what should I make a wrong choice and lose it all...
Anyway Non-Farm came and sure enough I got whipsawed from this market and lost everything I had in my account. Now it might be well worth understanding that this wasn't all of the cash I'd but just all of the cash I'd put in to my trading account to trade Non Farm...
However... This really hurt... The emotional impact it needed to see my account move from #5000 to #100 in the space of a few minutes actually got to me. I was distraught... Not only was I proved wrong by the market but I lost everything that has been in my trading account... I did not trade again reside for a few months.
Now let us look at the consequence of what it might have been with appropriate money management. Irrespective of how much of a certain thing it was I shouldn't have risked more than 3% (this is a lot to some). If I lost 3% of 5000 that would be 150 leaving me #4850. Now granted I wasn't going to be a millionaire over night but I definitely would have kept on trading the very next day... I would not have had the emotional barrier to overcome.
In the conclusion of the day Trading isn't a get rich quick scheme... It is an area which possibly can make you very wealthy but it will take commnt, time and perseverance. 95% of traders fail... a line everybody hears all of the time, but I am ready to bet that a large proportion of them just did not have sufficient cash to stay in the game long enough to learn how to be always profitable.
That is the reason why the Money Management is indeed important. Survival....
I hope you can realize that there are many distinct factors that contribute to a trader's success along with the system itself is just a rather small part of it.
I hope this helps a few folks out there especially those who are in search of the holy grail!!!
Reply With Quote
Originally Posted by ;
