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How often do you lose when trading?

>> Tuesday, December 8, 2009

Do you often have the feeling that whenever you enter into a trade, the price immediately turns against you? Even though all the fancy indicators show that it should move in your favor. How often does that happen?

The common response is around 70% of the time, that is why they are losing money and trading is so difficult.

Well, I would like to shake your beliefs! If it indeed happens 70% of the time to you, I would like to get to know you. Because I just have to do the opposite of whatever you are doing and I'll be 70% of the time right!

Actually, if that is the case, would you agree that it is also quite difficult to lose in trading. There is a complete random chance of being 50% right. So how come there is a statistic that 95% of retail traders lose money?

The main missing ingredient is psychology, that it unique from individual to individual. Students can attend the same trading course, under the same mentor, learning the same strategies, looking at the same charts, applying the same indicators but achieve vastly different results. (Apart from the reason that some may be sleeping in class.)

Most people focus on seeking the holy grail of trading, searching for that perfect indicator. They look for gurus and pay thousands for them to share their strategies. However, after learning, they do not get the same results as their mentors and blame them, after which, they move on to find a "better" guru, only to fail again and the never ending search goes on.

However, they will never find the answer searching externally, because the answer lies within. These gurus seldom teach the most important aspect of trading and that is psychology (because most of them aren't even traders themselves).

Greed and fear are simple concepts but difficult to master control over. They need to be overcome for you to carry out proper cut losses and letting profits run. Most successful traders actually suffer more losses than gains, however, each loss is small and each gain is huge. So on the overall there is a net gain, and that is all that matters in trading.

Most of the indicators and strategies work, else they would not have been so famous. Now even when everyone knows them, some use them successfully, whereas some cannot.

Instead of blaming the indicators or the strategies, and continue to search for the next best guru, work on how to manage your psychology.


Lau December 8, 2009 at 1:54 AM  

Open the newspaper and there are so many previews advertising to make everyone a millionaire.

Most of them teach technical analysis, which is easy. With technology, you do not even need to know the mathematics behind the indicator, just click and it magically appears with the standard values even.

There are many strategies available online free and they are just as successful and easy to learn.

The more difficult aspect to learn is psychology. That cannot be simply learned online, experience is necessary and a true mentor can help to guide by sharing his psychology when trading.

I think some of these gurus started out wanting to be traders, so they learned everything about TA. However, they were unsuccessful in mastering their psychology, so they did not succeed in trading. Now, so as not to waste their studying, they earn by teaching TA, but do not use it to trade personally.

financialfreedom December 8, 2009 at 9:46 PM  

Trading is like gambling.

You only hear the winners shout loud loud. Losers all keep quiet and won't talk.

Perhaps 1% of the population wins big while the rest lose big.

Edward Chin February 3, 2010 at 9:08 AM  

U are absolutely right ? The Guru in the market teach u past result BUT not future. It is just like a fortune teller cannot predict his/her life how to predict others. They learned a living by teaching.

Lau February 3, 2010 at 2:46 PM  

Edward, u have put it quite well with the fortune telling analogy.

we all have the same 24 hours a day. rationally, we will choose the path that earns the most with the least effort. so obviously, their teaching is earning more than their trading.



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