A loser and my life is over!
I refer to a recent post where I got out before that
180 degree Uturn
If you wait until the market moves on lower time frames
you can make some nice gains, and when it really is
moving and inertia is building up, you can trail quite
tightly, minimizing risk.
Often, the market isn’t really moving, price just had
a random spurt for any number of reasons
but if your stop is reasonably tight you shouldn’t
lose too much
I have made a Fantasy account which is actually
less than my typical results eg I win 50%,whereas these
accounts win 33%
but keeping losers small, we make £45 over 30 trades
which might resemble a 20 trading day month.
and interestingly, you can pick any random sequence of ten
consecutive trades and you always end in profit, even
losing 67% of the time!
Modest losers are effectively where you are testing the water.
At least half the time price won’t have sifficient inertia to keep
pulling away from the Stop, and you lose between £1.50 - £3.50
but when the market is actually moving it will pull away from Stop and
you simply trail the Momentum bars for £10, £15, £20 or more
It doesn’t have to happen all the time!
An indicator that tells you the current surge in momentum will be
good for at least 10 - 20 pips would be extremely useful, but no such
it has to be trial and error. but you do come out way ahead
The secret is managing your ‘error’ trades, both financially
Thats precisely what this post is about.
Every shopkeeper gets this concept
they order in various lines t hat they determine will make a profit.
Why don’t they only order stock that will sell like crazy?
That is actually what they are all trying to do, but they also
have no control over market forces and often get it wrong
so they might test the market first to minimize risk
The many times they lose, if they can’t have a sale
they simply consider it a business e xpense.
Thats all a trading loss should be, a necessary business
expense to test the market
I pay the market £1.50 to give me a signal that it
has momentum and will make me a nice profit.
The market delivers that signal in two ways
It stops me out, a clear signal it is lacking the inertia
I am seeking.
or my trade makes £10 - £20 which is the signal that
the market did have sufficient inertia to keep moving
without need to pull back to my sensibly placed Stop.
This viewpoint of paying the market a very small fee
for a win or lose signal is a very emotionally healthy
Of course you only seek such a signal when you already
believe the market is moving.