MONEY MANAGEMENT
Unleash The Victor
We often find ourselves making the same mistakes over and over. Coming to terms with the reality of trading can help you break those bad habits. Find out how.
Most traders do not take risk control and money management seriously, which is why many are unable to enjoy long-term survival. Logical reasoning tends to give way to inordinate emotions, but emotions are merely biological events like a cough or a sneeze with no meaning and are the opposite of thinking. Most market speculators like to think that the secret to trading success lies in trading strategies that allow them to enter at the right price, giving no thought to risk-control measures or discipline. Knowing how to limit losses, how to survive protracted losing streaks, how not to lose courage in the face of losing trades, how to control the emotions of avarice and dread, how to come to terms with reality in trading, and how to keep on being hopeful by encouraging yourself and other market speculators will go a long way in helping you to evolve as a market wizard.
COMING TO TERMS WITH REALITY
Information is vital in conditioning the mindset of a market speculator. In order to win constantly, you would need to do what most others would not want to do. There is also a need to learn what it takes to be a permanently successful trader. Each individual or group that speculates or trades employs a method that enables them to know when to buy or sell. Some combine two or three trading methods on one account. Some use fully-capacitated robots, whereas others use rule-based systems. A trader who follows long and short recommendations from a signal provider is also using a strategy.
FIGURE 1: A PROTRACTED BEARISH MOVE ON THE EURNZD. On this four-hour chart of EURNZD, you see serious bearish pressure from December 2011–January 2012. From November 2011–February 2012, this instrument plummeted by more than 2,500 pips. Someone who went long could have suffered a colossal loss by trying to run his loss. Likewise, someone who shorted would have achieved a colossal profit by riding his winner.