We spotted two of the most destructive factors on trading. First, in-consistent trading strategy. Second, horrible risk management. These two factors allegedly force any trader-want-to-be individual in to gambling and pure speculation, causing miserable and emotional drain and in some cases, life destruction.
That is an irony. Most retail traders failed while in fact, trading is one of the most precious and ultimate activity in financial market industry and has made some big names like Goldman, Morgan Stanley, UBS or any else to be getting even bigger than ever. This is just giving a more winning tip on the statement of āthe poor become poorer and the rich became richerā.
The lucrative result and lifestyle people heard down there, have blinded the real approach that has been making trading so powerful behind financial market dynamics. Inadequate knowledge and understanding, collided with minimum supervision on risk management are totally contradict on what the real professional and institutional traders have: dual control and a bunch of tiring regulation.
In the industry, traders are fully regulated and strictly supervised. While in retail area, none of it works. No supervision and dual control. Creating space for loose awareness on risk handling. It has been so common that retail traders hit their account margin limit. While in the real industry, you will be fired once your account incrementally moving toward your margin limit.
Those facts make it is so important for retail traders, to develop a positive habit on trading. Rather than be blinded with the potential return trading can offer, retailers are better forced to raise their awareness on risk. That being said, the urgency to develop positive habit on trading is better than important.
Letās develop positive habit on trading
First. Stop looking for the best trading idea. Financial market movement is random. More liquid the market, more efficient they are (see Efficient Market Hypothesis on wikipedia). It means, no one could make better return than the other ā that is, normal return. Ceteris paribus, the only way to make money in the market is not losing your money.
Second, risk management. Of course there are some cases where trader can gain more than the others. That is all due to the āextraordinary eventā. Like shocking news of economic crash, or in contrary, economic jump. At this moment, risk management of any traders become very crucial. One who has strict risk management will save their ass when shocking negative news come. And better risk-return ration when positive shock taps in.
Third, keep repeating those first two. Say it to your mind and show it to your behaviour: āno best strategyā, and ākeep up our risk managementā. Repeating is crucial. Because repeating creates stimulates our brain to keep doing the same. In our brain, there is a mechanism called reticular formation. That is, part of the brain that produces habit.
Fourth, never trade alone. Trading is indulging. And failing trades even more indulging. Failed traders tend to be addicted on failure. Because they want to revenge. What an unfortunate. And loneliness will drive an addiction to be more severe. Find a partner. Find a place to share your emotions. Trading groups may help. Trading forum does as well. But remember, keep doing on point 1 ā 3 above. Otherwise, you will be getting trapped on paralysis of analysis. It is a situation where one can not define the standard of analysis due to so many informations coming in. Beware.
We are fully aware on these. Some of us have been on that situation and getting f*cked up. But we are getting up. Hold things together and trade for the better life. You can also join us for free. Go to our live trading page and discuss. Just remember. Nothing goes better without great mindset and right attitude.