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Don,
Lets start with the common knowledge that 80% to 90% of traders loose
money
trading. How could we consider it a winning game then. And if you begin
trading with the assumption that you are in fact in a loosing game, you
should know that every position you take is a loosing position - until
it
proves you other.
Its lot said about cutting losses fast and since loosing sure is a
normal
part of the business, its essential to stay alive. So if I put a
position
on assuming its going to be a looser, I donīt need to wait a thousand
dollars a contract to find out its a looser. The position is a looser
right
when I put it on, the only chance of not becoming a looser is moving in
my
favor right away. Right away is the problem. Random factors canīt be
ruled
out, so you need to give it some time, but since you have a looser on,
its
not necessary to let the market prove it a looser by hitting your stop.
So
you have nothing like a price stop, more a time stop.
When you buy beans monday afetr the opening, why do you do it? Because
you
want the beans to move up the next week or tuesday - surely not, you
want
it move up right away. You have a high possibility that your timing is
wrong, since you have a looser on, so if monday wasnīt the right day, or
you are to early within the day, remove the position and try later
again,
no need to wait to see the beans move 10 cents against you, before you
admit that your winning position turned out to be a looser. You are in a
looser right away and if this position isnīt prooving you other fast,
get
out.
With that approach you easily overcome the problem that you stay in a
position too long, just because you want it to be a winner and have an
ego
problem with accepting a loss.
I try hard to trade this style, but it still brings some ego problems.
My
winner/looser ratio got worse, but the losses are so small, usually a
couple of hundred dollars with multiple contracts that the winner easily
out weigh the problem and so my average profit/loss a trade surely got
much
better.
Questions remain : Like when I put on some beans and an hour later Iīm
two
cents into profits, are the two cents enough to prove the position
correct
or should the market have carried the trade higher already, if it is
indeed
a position qualifying to hold onto.
Maybe we can get to a discussion like that later. The big item is just
the
difference in attitude when entering the market. This attitude gives you
an
edge since its much easier to get ride of a looser than of a
wanna-be-winner, you usually can go to bed without worries and pain.
This
makes the entire trading affair less stressy. It reduces the negative
feedback and only allows positive feedback (almost, Iīm far from
perfection). So it turns trading in a very positive experience by
eliminating the big pitfalls the lurk around the corner.
Hope it explains a bit about the attitude - Ulrich
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