Trader J's Inner Circle Message Board

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Strategies & Market Trends : Trader J's Inner Circle

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To: Trader J who wrote (18075)	7/27/1999 8:04:00 AM
From: Wes Stevens	Read Replies (1) of 56535

Got this in a note from Mtrader. Good advise and very timely: We as professional traders and aspiring professional traders usually come into the market wired wrong. We learn in normal society that we need to get up at 6am every single day, get ready for work and come hell or high water be there. This mentality severely impedes the aspiring market professional in his or her journey towards success. As a professional market player your job is not so much to make money as it is to preserve capital, i.e. to lose a minimal amount of your capital when the chips are down. You must protect your trading capital like it is a newborn baby. This means not trading when the market is choppy and confused. If your system would have lost X amount of dollars today, but you happen to have noticed the market is not treating your system kindly so you are on the beach soaking up the sun and sipping mai thai collecting interest on your margin account, this is a very real victory. In times such as we experiencing right now, if you desire to keep trading you should do so with minimal risk to your account. In normal times we are willing to risk 1% on a swingtrade (up to 2% is acceptable) and 1/2% on daytrade. Right now our acceptable risk is half this. Many novice traders will use a martingale money management system when things are not going so well, double down on trades after a streak of losses in an attempt to get it all back in one monster trade. When we see this in a trader we start to worry about his or her future because we can be relatively certain the end is near. In times when your viable trading system is not working a true market professional will employ an anti-martingale approach to money management. (S)he takes smaller and smaller risks until the market begins to again treat him or her kindly. By using an anti-martingale style to manage your risk you assure that you are taking your smallest losses when the system you are using is performing its worst. By using an anti-martingale system the professional trader manages to weather a storm that capsizes others, forever taking them off the seas of the market.

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