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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: KymarFye who wrote (15201)	2/9/2002 4:49:45 PM
From: Apakhabar	Read Replies (2) \| Respond to of 18137

The disasters I was referring to, and the kind that can be avoided through the oversight of others, are exactly the sort of "slower motion" and "lower scale, tactical" mistakes that you are referring to. They become disasters when they go from being a small mistake to a something that wipes out the profits from many successful trades. For example let's say your average win is $100 and your average loss is $50 and your success rate is 50% and you make ten trades a day. That's $250 day. Now if every other day you throw in one additional trade where you blow your stop, average down, blow another stop and finally come to your senses before it gets way out of hand and you make a $600 loss, you're not only going to lose money but you will soon find yourself with a habit of blowing stops. My point is that when you are learning you can't just accept these kinds of losses over and over again as "tuition." They are worse than that for most people because they cause mental harm that is pretty hard to quantify but is nevertheless real. The "tuition" that we all talk about is the trade that gets stopped out according to your plan. Imagine two traders who each lose $20,000 in their first six months. Trader A made 800 trades and lost $25 on each one of them. Trader B made 800 trades, had only 12 losers, but these losers were for $120,000 and they wiped out $100,000 worth of gains. Obviously you wouldn't want to be either trader, but Trader A, at least, has learned discipline. The reason I prefer to focus on this is because the obvious truth is that not everyone can succeed as a trader, so it should be the FIRST goal of novices to find out whether or not they have the ability to do it. If Trader A cannot learn to make money with such rock-solid discipline, he will have saved himself vast amounts of time, money and energy by leaving the game early. Meanwhile Trader B may continue to delude himself that he only needs to become more disciplined (all the while each disaster reinforces the habit of making a big loss) and continue down a dead end. "How to Know When to Quit Trading" is a subject that traders generally don't talk about, but it is one that novices ought to think about carefully. I think there is a tremendous value in quitting for the right reason. Traders who are disciplined, yet lose, will quit because they realize they do not have the talent for it(assuming they tried a variety of trading strategies). There is nothing to feel bad about here, no reason to try again. They can turn their money over to somebody else and take their 10% per year, which may sound unromantic, but is better than losing.