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Strategies & Market Trends : 1999 Year in Review--Talk about your trades
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To: F Robert Simms who wrote (2)12/24/1999 8:45:00 PM
From: HeyRainier   of 7
 
Bob,

Good lessons. It's a pretty good bet that greed and impatience will play big roles in detrimental trades for numerous participants--it's the nature of the markets. On Lee's note, I have to say too that on some occasions, some of my wins turned into losses because of greed, and losses never turned into winners because of impatience.

One of the theories I hold is that the average human is hardwired for failure in trading the markets unless he (or she) learns to control his emotions through some form of market discipline. My readings in human behavior in the markets tend to show that traders (1) secure gains quicker out of a great fear of losing a sure win and (2) put off recognizing losses longer due to the psychological pain involved of admitting a mistake, which translates into holding losers longer and cutting winners quicker.

These two combined are a formula for trading disaster. Instead of letting the winners ride and cutting the losers quickly, this behavior promotes just the opposite. It's no wonder then that various reports claim that as much as 80% of traders lose money, while only 20% make it. I'd bet that this 20% has learned to control their emotions, or at least establish a trading system that leaves no room for it.

Does anyone have other instances that can illustrate this point?

Rainier
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