I do agree. If I look at systems presented here on ET I see ( in almost all cases ) that at least one, often more, essential ingredient is missing to make an informed decision. Often these systems are a combination of the same indicators packaged in a different format but still depicting the same stuff. Enough said. Also important to read Jack Scwager's books to see how succesful traders think (and not wannabees on ET) Maria
Some people are not using mechanical systems but are using "discretionary" systems with a different ruleset from mechnical. (ps the "discretionary" system can have been just as much tested as a mechanical and depends also on a firm rule set. Except that often these are implemented in such a way that mechanical backtesting / implementation is for one reason or another not possible or feasible) And I agree: what a crook Maria
Crnindia: I knew it would happen. With Jack on hiatus (I hope that isn't causing him too much discomfort, they can fix that now, you know), leaving us in a guru jackuum, it was inevitable that aspriring gurus would arise. So ET gets what it deserves, and so is this new guru. 1) Is trading free in India? Here in the States we charge for it four ways: a) round trip commission b) the spread c) slippage d) periodically fading the majority retail position 2) Maybe it is different in India, but here you generally don't know you're wrong until price goes against you, adding to the pain of (1) above 3) So there is NO WAY you can preserve your capital without a HIGH expectation proven system 4) Your simplistic example of 10% down on the last trade and 10% up on the next trade is ludicrous, UNLESS you have a system over there better than anything we have over here So please, if you sincerely want to be a guru here, you need to tighten it up a bit. After all, we were trained on Jack, and we ain't stupid anymore. H. Plecostomus
Being interested in the markets and being interested in making money are two totally different issues. To make money on the markets you have to have enough money in the first place. Catch 22? Don't dream! You will only dissapoint yourself.
Stop losing = stop trading, like others have suggested. Not exactly sure why your wasting your time w/ your rules if you're complaining about losing. Losers don't generate winning rules. If you're still having trouble w/ 20 yrs of experience you should consider another profession. Trading is very simple but we try to complicate it. IMO trading psychology is BS too. If you study the market and know what's going on, you can have the worst mindset and still make money; though it doesn't mean you're not going to have losses. It's the proven approach and confidence in that approach that creates the winning attitude.
Quote from OP: My belief is that if losses are stopped, then one can either earn or not earn but he will not lose. Of course, if losses are stopped you will earn money. That is like saying if you don't lose, you will win. That is true. The problem is you can't stop losses. You can take measures to cut them short, but you must face the fact that your trading decisions will not always be correct. As a matter of fact, accepting that a percentage of your decisions will be wrong is often one of the most difficult things to do when you start trading. The result is that a lot of people stay in losing trades way too long. Instead of having many small losses they will have a huge loss and blow out their account.
I believe that every trader has to pass through these three stages of development: Every trader loses initially I strongly believe that every investor who comes for trading initially gives losses as he/she is unable to have control over his greed and fear. At times with all the information and luck in his favour, he makes profit, and then because of his new over confidence, trades more which results in his profit gone and also sometimes a portion of his capital gone, This cycle of fear of the losses and greed to earn more makes him initially give losses The second stage begins where the trader begins to make no profit no loss. Out of the total investors who enter the first stage, 80% of them finish off at the first stage only and after an year or two find that the stock or commodity market is not their cup of tea. So in the 2nd stage only the 20% investors try to break even in their trading and quite a lot of them are able to have control over their fear and greed with a result that they stop giving losses. Now these traders are ready for the 3rd stage The trader starts to make profits This stage where a trader makes consistent profit i.e. he does not give loss cheque to the broker. In fact this is the stage which everyone wishes to have. But I strongly believe that anybody who wishes to come to the 3 rd Stage has to pass through the above 2 stages. Now we come to 2nd principle of trading and that is Always use stop loss orders.( Here you should know your loss you can give in a situation where the trade starts going against you.) In my seminars i stess this point quite a lot as the stoploss is the most important thing. One should know how much loss one can give on each trade he takes. The stoploss should be pre determined. What I said earlier of 10% loss was a general rule for an investor who wished to take delivery or trade. This 10% stoploss rule can't work with intraday traders. (What I wanted to stress earlier in my topic was that one should always have money to trade and with that 10% rule one will be always there in trading. For intraday traders they will have different fine stoplosses and their trading strategies will be totally different). What I am telling at the moment is for a seminar where I first have to make them stop giving losses. Normally what happens is that people take deliveries and keep holding till they do not go up, in such cases this 10% rule works. I suggest a stoploss for every trade. Generally what happens is that you buy two stocks, stock A and stock B. Both you buy at 100 units each. Stock A becomes 105 and stock B becomes 95. What a gereral investor does is sells the stock A at 105 and waits with stock B which is 95 now. After 6 months what this investor finds is that Stock A has gone to 150 and stock B which he is holding at 95 has come down to 50. Here I stress is that one should never hold on to a falling stock and if his profit is going up, he should go on holding. Cut the stock which is going against your trend. Say now you bought the stock A and are holding, the question arises as to when you are going to sell. I suggest that they go on holding it and now at the end of the month i.e. end of last week Friday see its closing price. Let us say the closing price is 130. Now he should make a stoploss like this that if stock closes below 130 for 3 days than he should quit else go on holding and then again see its price at end of month and this way his stoploss keeps going up. ( In case of shorting it is vice versa ) (Just to take care of some criticism by expert traders, I suggest strategies like playing with the averages example if the stock is 10% higher from its 25 day moving average, he should quit the stock. - This I am mentioning here is to tell the critics that we are slowly trying to give the explanation and ultimately my aim is to give so much to lay investors across the country that they stop giving losses and if losses are stopped then they can start earning. Also I aim at teaching them how to trade and make calculations even with simple averages which can take care of everything, they do not even require a computer for calculations. The simpler the system the better it is) From the slow trading, we go to intraday trading in the last. A trader who can't succeed in long term trading should not go to intraday trading at once as taking decisions intraday are far more challenging than taking decisions on long term basis. (We plan to cover it later)
I thank all for giving so much feedback within 24 hours of the posting. Here on this page I have tried to reply to all. For Nononsense Thanks for your stop all trading advice. I agree with you that most are chronic losers. I have never tried to posture that I am a winner, but I am trying to tell how we can stop losing. For Steveosborne Thanks for your warn comments, I will keep posting my ideas as it will take still many days before I am able to post all my ideas. For Toc Thanks for taking time to post a reply For CrystallBalls This 10% rule is a general rule so that one always remains in trading. For Steveosborne(2nd post) Hopefully my above note gives you an idea when to get out of a winning position with a stoploss. Even the 10% higher or lower from its 25 dma tells the exact point. For Mogul, CrystallBalls(2nd post) 10% is not for intraday trade, but is telling you a way of trading where you always have money with you. If you always have money to trade , you can be a winner. For LwLee You are right that in India this day trading culture is very much prevelant in stockmarkets as well as commodity markets. These broking terminals are there in every nook and corner in INDIA. And since it is a developing country the fluctuations in prices are great. The trends last longer. And one can make really good profits in these trends. But I find good profits even in Comex, trends of gold, siver and copper. Their charts also gave a lot of money. For Bali_Survivor Thanks for suggesting the book by Jack but I could not understand what else you had written. For Hypostomus The answers to your questions- Q- Is trading free in India? A- No. You have to pay a brokerage and a margin. General margin being paid by traders is around 0.03% for every trade taken (ie. 0.03% on buy as well as 0.03% on sell) This brokerage is on future as well as option trading. On delivery it is 0.2%-0.5%. The spread between traders is one of the lowest in the world in the most active stocks. I agree that you have good systems of trading but Indian systems are also coming of age (one of the most important things we try is that one shouldn't give losses whether one earns or not) For Eliot Hosewater Thanks for the suggestion for the book For o10Maximus I do not wish to take any other profession as I am very comfortable in this profession. I had thought of starting this thread after realizing that if small investors are giving losses here in India, then they must be giving losses in other countries also. I suppose that ultimately the pyschology is same everywhere with different variations. For Vanhelsing I fully agree with you.
Ok. on the 10% rule... saying that it´ll keep you trading forever is quite wrong. If you take 5 losses in a row... very unlikely, but it does happen... You´re down to $60k... that´s 40%... in order to get back to 100k you´ll need to profit 66% of your capital... You´re making the mistake of calculating rate of change as (price2/price1)-1=g where you should calculate it through the natular logarithm... Ln(price2/price1)=g... if you use that formula you need to cut your losses before 10% in order to be able to comeback to zero with a 10% profit. Lossing 10% on each trade would mean that after a lossing streak of 10 trades you´re down to 35K... and that´s without adding commisions and therefore ignoring the crecent scale economics present in trading. Commisions will eat you alive. A profitable trader will make net profits in 6 months or less. Not three years. If you´ve been trading for 20 years and you´re still not profitable, then stop fooling yourself, you´ll never be a profitable trader, and you probably won´t be able to teach others how to trade... might as well get a real job or go to the casino. If you´re teaching this on your seminars then it doesnt surprise me that most ppl you teach have to hide from their families in order to trade {gamble?} they´re mortage away... On the other hand... the markets always need fresh meat... and I like eating lamb chops... so keep up the good work. {and thanks for dinner}