COMING TO TERMS WITH REALITY
“One of the problems in the markets is that people found lots of other people or things to blame. People who blame someone else or anything external always repeat their mistakes and avoid personal responsibility… You are totally responsible for your performance as a trader; therefore, you should devote significant time to working on yourself in order to be successful.” – Dr. Van K. Tharp
“There’s no need to find fault with the circumstances of our lives. We can waste time blaming other people, our background, our environment, or our life situation, but there are times when we need to close one or more chapters in life that are causing us to lose. We need to close that chapter and get on with the rest of the book.” – Joe Ross
Many traders describe their trading experiences as an ‘emotional roller coaster’ of soaring success and plummeting disappointments, daily or weekly frustrations and challenges, and exciting accomplishments and achievements. Do you feel dejected and despondent whenever your trade turns negative? If so, may this article help you to understand that losses are normal, but they shouldn’t lead to a margin call or huge drawdowns.
As far as trading success is concerned, perfectionism is an extremely harmful mindset. Every trading system will have periods of losses – whether in a day or a week or a month. No trader on earth can avoid losses. Whenever you open a position, either your stop or target will be hit, or either you close it in a negative zone or a positive zone. There’s no way around these. You need to resolve to stop feeling sorry for yourself and dwelling on negative thoughts whenever a trade goes negative. So, you have a loss in the market. A loss is a loss. You only suffer when you believe that it shouldn’t be that way. Arguing with reality causes all suffering. Until you understand this, you don’t understand life and trading. Loss trades would test your commitment to trading mastery and forever change the way you view the markets when you were still a beginner. However, they’ll also give you the opportunity to develop valuable qualities befitting a great trader.
The notion that market makers run stops is nonsense as the weight of capital required to force the market in a desired direction to run a couple of stops would be possessed only by a select few institutions and central banks – even then, long-term manipulation of this market is practically impossible by a single player.
“I often meet people that actually think I and other instructors hardly ever lose,” reveals Sam Seiden, “They want to take our classes because they think they will learn to never lose and only have winning trades all the time. We have a high winning percentage but we certainly have losses. None of us like to lose; I know this firsthand from competing in sports. Just like in sports, however, falling down in practice is a must if you are going to skate faster. Striking out from faster pitches is a must if you are going to make it to the big leagues; swinging your driver harder and slicing the ball 100 times is a must if you are ever going to hit a 300 yard drive straight. Imagine what would happen to the casino if they tried to eliminate the losses. They would be out of business and none of us would have a playground in the middle of the desert to enjoy. Losing in trading is great so long as it’s proper losing. To become a professional winner, you have to first become a professional loser.”
Just as a pair of inexperienced skaters needs time and patience to find their balance on the ice, you need time to adjust to the trading principles that work. Eventually, though, you’ll reach success.
I trade what I see, not what I think. For my own benefit and that of my clients, I carry out my simple analyses and retrograde calculations and open positions; which include risk management settings that make me the average losses that are much smaller than the average profits over a long period of time. In spite of inevitable losses, I’d have profit to declare on annual basis. I know that I just have to stay with this and go thru it day by day, week by week, and month by month.
The key is to manage your open trades as opposed to just sitting back after entry and hoping things work out. With good risk management applied, you’re protected if your position is filled and moves negative. If the position moves in your favor, then raise your stop.
NB: Please watch out for my coming articles with these titles: ‘Resist the Lure of High Risk – Part 3,’ ‘Carrying Out Stealth Raids in Weak and Strong Markets,’ ‘Worst-case Scenarios – Facts Are Sacred,’ ‘Effective Swing Trading in Forex,’ ‘Advanced Gap Trading – Trading with Insane Accuracy,’ ‘3 Recent Gap Trades,’ ‘Trading for a Livelihood – One of the Best Jobs in the World,’ ‘If I Were a Trading Neophyte…,’ ‘Developing the Right Attitude towards Losses – Part 3,’ ‘The True Holy Grail – The Long Sought for,’ ‘Achieve Success through Sensible Risk-to-reward Ratio (An Interview with a trading Enthusiast),’ ‘ Clarifying Some Issues – Part 5,’ ‘The Change from 4 decimals to 5 Decimals,’ ‘Optimization of the USDCAD Hedging Strategy – Bringing the USDCAD to Subjection,’ ‘The Proper Way of Using the Bollinger Bands – Learn the Truth from the Horse’s Mouth,’ ‘Monthly Trading Report (June 2011),’ etc.
I end this article with the 2 quotes below:
“I started trading because I wanted to make profit, however my mind was still focusing on not to lose. For me this was buried deeply in my subconscious so I did not recognize it. I think about two weeks ago I decided I’m trading to win, after I got stopped out 4 times in a row. Of course I will be stopped out on occasions in the future. However I trust and focus on the profitable trades that will follow.” – Marcus de Maria
“Minimize your mistakes and trade at 95% efficiency or better. You make a mistake when you don’t follow your rules. If you don’t have rules, everything you do is a mistake. When traders do have rules, most of them have trouble trading above 70% efficiency (3 mistakes every 10 trades) simply because they haven’t worked on themselves. Trading at 70% efficiency will destroy the results from a good trading system.” – Dr. Van K. Tharp
Your questions and opinions are highly welcome.
With best regards,
Forex Signals Strategist, Funds Manager &Coach
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