Have you ever had THIS FEELING when you are having a STREAK of WINS and GAINS and you felt AWESOME?
I used to but then one day I had a couple of bad trades and WIPED OUT my portfolio and had to start from scratch. I was so DEPRESSED, thought of quitting trading and thought this was not for me. I took a couple of weeks off to let it sink in and to REFLECT on what happened and how it went wrong. I REALIZED trading is more than just…stock/coin/pair picking. Think of it like why some people pick the same stock/coin/pair but only a few are PROFITABLE, while some aren’t. If we are used to WORKING in the CORPORATE WORLD as an employee, making good or even bad decisions STILL GETS US PAID. But as a full-time trader, EVERY SINGLE DECISION we make, it will ALWAYS affect our OUTCOME.
Here are some important things that we must take into consideration while trading.
Why is strategy or edge important? We must UNDERSTAND that any financial market is a zero-sum game. Our loss is the PROFIT of others and our profit is the loss of OTHERS.
So if we are trading the same strategy over and over again, yes it might work, but as the market starts to evolve there is a probability that it will change its behavior and soon our strategy won’t work anymore and might even be used AGAINST US especially if the market changes its cycle.
Why is strategy important? Well, risk management may be the most important part solely because we want to PROTECT OUR PROFITS and capital by all means and ever away from stupid trades, and only risk a small percentage of our account at any given time.
Trading is a game of speculation– if we don’t manage our risk, OUR portfolio’s growth and as a trader will be a mere speculation.
Why is Psychology important? I believe a lot of us already know everything you’ve read here, but why is it that some aren’t still profitable and keep on losing? WORSE wipe their account out.
The answer is: THEY WANT TO LOSE. Even if they know tons of strategies, methods and indicators, they can’t even do the RIGHT THING.
We as human beings, we are a CREATURE OF HABITS. If we continue to create a system and develop a bad habit, this will grow and MANIFEST. If this happens, we must be aware and immediately BREAK IT.
List of common bad habits as a trader:
No concrete and back tested/forward tested trading plan.
Putting too much position-size on illiquid stocks/coins/pair.
Emotional stop-loss, (cutting your losses when you can’t take the pain of holding anymore).
Listening to market noise and just blindly ride the bandwagon.
Risking 100% of total portfolio.
How to win and keep on winning:
Concrete and backtested/forward tested trading plan.
Cut, cut, cut, cut.
Ride your winners.
As a sample, here is my ONT trade which I am currently riding and keep on adding to my winning trade.