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5 Tips On How To Bounce Back From Trading Losses: A Traders Journey
5 Tips On How To Bounce Back From Trading Losses: A Traders Journey
Trading is an interesting profession and has no peak as in other occupations. It is in fact an endless journey of discovery of oneself and trading itself. Trading for me at beginning was very tough not that I was not successful in other endeavours but i took it like every beginner thinking that it was easy. With this perception, i approached trading without a plan or proper trading education on how the market works. What do you expect? Your guess is as good as mind. It was a total disaster after taking many losses; i was almost psychologically blown away. At this stage, two important things happened to me, my P&L was in the red and i was down emotionally.
My worst loss that stands out in all my losses was a trade i took (short EURUSD) in anticipation of French Referendum thinking that it would be in favour of the European Union but alas I got a margin call after the result was negative. Please do not ask me about a stop loss i did put a stop loss but i later removed it because i was so confident it was going to be a winning trade.Hey, can’t you understand. I have been declaring losses so i thought this time around i would take a large position and cover all my losses. I was subsequently charged to court (trading), tried and found guilty (for losses).Punishment, six months without trading. While serving my term i embraced trading education especially technical analysis and trading psychology. So when I got a handle of certain strategies applying technical analysis and trading psychology i started trading again but not without losses but i followed my trading plan anyway and things improved especially when i became comfortable with losses as expenses in the business of trading.
Valuable Lessons/Tips
Never Trade Without A Trading Education-acquire proper trading education because the knowledge through trial and error in the market can be more expensive and time consuming than the normal trading education
Never Trade Without A Plan-Having a trading plan is a most in this business if you want to succeed. This plan most specify and predetermine your entries, exits, stop loss, position size and your psychology(your emotion at the time you click enter).There could be more you could have on your plan but the most important thing is that you must follow it, because when you follow your plan you have a chance of succeeding in trading. You may be tempted to say do I have to follow this damn plan every day, just go to a nearby Airport and observe what pilots do every day; they follow their flight plan and check each one before taking off. He can as well say, i feel better flying without my plan today because I do it everytime.That you know my friend will be disastrous.
Do Not Be Smarter Than Your Emotion-What do traders do when they are tired? They wait for an opportunity instead of turning off their computers and call it a day they stay on waiting to initiate a position and when the trade turns out to be a loser they become angry adding to the tiredness.Hey,you know what, you cannot win at trading if you are not in your right frame of mind. If you have problems with your spouse please do not trade, if you have a string of losses do not trade, take some time off and go over your losses until you know what went wrong before you can put on another trade. If any thing occupies your mind apart from the market and following your trading plan when you are ready to trade, do all you can to resolve it before you start trading for the day. If you cannot, go golfing.
Cut Your Losses Shut And Let Your Winners Run.-This one sounds familiar, right. The professionals do exactly as is stated here but what do novice traders do? They do the opposite by letting their losses run and cutting their winners shut. In other words, they are patient with their losses and impatient with their winners thinking that their positions would come back. The hard truth is the market does not know whether you are winning or losing. It will go wherever it wants to go and do what it has been doing, which is moving up, down and sideways. It is now left to you to find opportunities within these up moves and down moves.
Becoming A Professional Trader Takes Time -This might sound funny. Do not ask any trader to tell you how many years it will take you to become a professional/experience trader. The truth is that real professional traders know that the education of a trader never ends. It is ongoing because market is not static, it changes so if you think you have acquired enough trading knowledge and market conditions change and you cannot cope with the changes you automatically become a learner. The fastest way to become a good trader is to learn from the professional traders (their strategies and how they apply them) taking into consideration your own psychological make up.
Market
If you don't know who you are, the market is an expensive place to find out.
Quote: George Goodman Afaik
Quote: George Goodman Afaik
10 Steps To Success
1) Knowledge Acquisition Great traders are voracious learners. Most professional occupations have a learning curve. Doctors, lawyers, criminals, etc.. often study years to refine their craft. Novice traders often believe they are immune to such time intensive studies. Don't fall prey to such ignorance - study the markets, put in serious chart time, read and learn from those that are winning.
2) Money Management This one is simple. Trading more then 2-5% of your account on any one trade is account suicide. Let's assume you start out trading a $1000.00 mini-account. Your system has a 30 pip stop loss. The maximum you should risk on any one trade is a dollar per pip. The market will forgive a lot of things - bad trades, bad days even bad weeks but without the capital to withstand the drawdown your trading career with be short lived.
3) Simplistic Strategy Have you ever noticed Forex scam sites often provide a unique system that only they have? Additionally - these systems are only known by a hand full of successful traders. Your system should do just the opposite. I use pivot points, psychological levels and trend line breaks because large institutions follow these levels. As a retail trader your goal should be to pick up the pennies in front of the steam rollers. Keep Occam in mind when adopting any trading system. Leave the over complicated systems to the guys at Long Term Capital.
4) Trade During Prime Time One of the biggest benefits of the currency markets is its hours. It's open 24 hours a day 5 days a week. This is great for trend analysis but not for trading. Don't let these extended hours fool you. Only the biggest players trade during the prime hours... so should you. Keep in mind that only 14% of all trades occur outside of non-financial institutions. That's where the retail trader lives. Since we only trade the EURUSD we only trade between 2:00am and 11:00am EST. This time period covers the European open and close, the open of the US session and the overlap between the US session and the European session.
5) Follow Your Trade Plan You don't know where the market is headed. Don't guess. Hope isn't a strategy. Once you adopt a trading strategy that fits your trading style stick to it. Leave your ego at the door when you begin your trading day. This is one of the most difficult things to overcome. The old adage plan your trade and trade your plan is very important. When you trade outside your plan you will lose.
6) Double Your Demo Account Almost every Forex trading platform offers demo accounts. When you can double your demo account you are ready to trade real capital. Additionally - after your double your demo account trade the first few months of you real capital using micro-lots where each pip equals a small dollar amount. This will help ease the emotional impact of trading real capital.
7) Trade with the Trend All those little axiom's about the trend exist for a reason - the trend is your friend... trade with the trend until it bends... trade the trend or lose in the end - you get the idea. These exist for a reason. They are true. Use long term trend analysis to determine market direction. When you trade with the trend your chances of success are greatly enhanced.
8) Set Realistic Expectation What's realistic? If you can return 5-8% a month you are doing great. While this may seem like a relatively small goal very few traders can achieve this month after month. If you set unrealistic goals - say 20% a month you better be sitting beside John Arnold because that's about the only way your going to see that kind of return.
9) Post Trade Analysis When the trading day is over take a few minutes to analyze what happened. Did you follow your trading plan? Was your analysis accurate? Why? Why not? At the end of the week spend some quality time looking over the trades you placed during the previous week. How many trades did you take? Are you over trading? Many traders find it advantageous to keep a journal of their trades and their thought process for taking or not taking the trade. In a very short time you will see patterns emerge that will aide you in fine tuning your trading.
10) Predetermined Profit Targets and Stops Setting your stop loss is a must. Intra-day traders usually use a 20-40 pip stop. After you've adopted a system and spent hours watching the chart you will know where your stop should be. Once you've settled in on a stop never move it. One more time - never move your stop! Remember that capital accumulation is secondary to capital preservation. On the other side of the equation set profit targets prior to entering your trade. Utilizing pivot points will always provide you with realistic profit targets.
Source : http://www.thefxpivotpoint.com/10StepsToSuccess.htm
Trade Your Way to Financial Freedom
Read this book
The single most important book I've ever read is Trade Your Way to Financial Freedom by Van K Tharp. The two most important parts of this book are on expectancy and position sizing. Read this book. Successful traders apply the insights Van details in this book with laser focus. Highlight it and then read it again. It will make you a better trader.
We aren't the only ones who believe this is a masterpiece. Ed Seykota (a trading legend) called this book, "one of the three best ever written." If anyone reading this knows Ed please have him forward me his other two recommendations. Change what you think you know about trading and pick up this book. You can buy it new for under $20 on Amazon. If this book doesn't change how you trade then read it again - you missed something.
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