When a trader enters a trade, he believes is more likely he will make money than lose it. Fact! More than 90% of traders lose money. Fact! They lose money, because of lack of discipline, bad money management and insufficient capital. Fact! Lack of discipline happens when something is difficult to do, when we are out of our comfort zone. If I have to eat a chocolate bar a day for a year, would not be a problem. But if I have to get up 6 oâclock every morning and run for half an hour for a year, that would challenge me for sure. Lack of discipline with trading, comes when our system or our trading method generates too many losses. This makes us lose fait in our trading system and makes us afraid to enter again and we look for an other method. Bad money management is when we trade too many contracts according to our trading capital. This comes back again to our system, which has too many losses. More contract we trade with a set capital, less we last in the market. Insufficient capital is not different, less we have, less we last, again because our system which has too many losses. In books and on seminars we learn that we need a big capital and strict money management rules and to be disciplined enough to stick to our system, to be able to profit from trading. Why we need all this? Simply, because we need to be able to withstand the lots of losses the systems generate. Most of the computerized systems and trading methods work by generating lots of losses, which need to be cut short and few big winners, which need to be ridden all the way. And hopefully the few big winners will make up for the lots of small (if we cut them short) losses. On the other hand if we would have a system which makes more profitable trades than losses, it would be much easier to stick to it, would be less pressure, could trade more contracts with our capital (no need for withstanding lots of losses) and also could start to trade with less money. Even if we would have lots of small winners and few losses (which would be cut short) we would be profitable. The bottom line is, that these systems out there generate lots of false entries and also false directions. When the system, indicator or method signals a long or short entry most of the times are false. You be better of going in the opposite direction. Something to think about! Hun
going opposite of the signal won't do any good unless you have a rule for taking profits. which means you're right back to having a system because a strict anti-system is nothing more than...just another system. the only way around maintaining discipline is sheer luck.
I didnât say we donât need a system. I just want to point out the facts, that not maintaining discipline is caused by losing systems out there. The 90% of traders losing money doing the same things over and over which doesnât work. We might be better of doing the opposite to what we doing now. What are your thoughts on this? Hun
This thread discusses inverse trading, check it out http://www.elitetrader.com/vb/showthread.php?s=&threadid=20465&highlight=inversely TM Trader
The thing to realize is that 90% of total trades are not losers. The logic of fading these "90%ers" is not supported by any valid premise. There is alot more to consider.
TMTrader Thanks for the link! Sorry everybody, I didn't realized that this topic was discussed earlier. Hu
Just wanted to point out that of your initial reasons of discipline, money management and capital, exactly none of them are changed by reversing trades.
TGregg I think everything is changes for better. When you constantly winning even small, your brain thinks differently to the opposite to losing constantly. Hun