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Stopping Yourself
I read on a bulletin board a traders comment that on his first
outing trading the E-Mini S&P 500 he lost on each of his
trades. He noted though, that had he had a wider stop each of his
trades would have been profitable and that therefore he would be
trading with a wider stop in future.
A wider stop on these particular trades may have worked, but
this does not mean that a wider stop per se is the answer. In
fact, everyday there is the possibility of any given trade going
into profit if given enough room, but that does not a wise
strategy make. This trader was a seller in a market that
subsequently went down; hence he could see that had he given his
position a bit more room he would have made a handsome profit.
Unless this trader has the ability to always accurately predict
the direction of the market he is going to experience days where
he is wrong and the market goes against him, in which case his
potential for loss with wider stops is greater.
When deciding an appropriate amount to risk on any trade (i.e.
size of stop) a trader has to consider more than the potential
profit on a particular trade on a particular day. What this
trader was saying to himself was 'If I had a 3 point stop instead
of a 1 point stop, I could have made 15 points; therefore I will
always use a 3 point stop!' Partly what he was saying to himself
was 'I was right!' But he wasn't right; in the time frame of his
trades and within the risk limit of those trades he was wrong,
his timing was off and that is what he needs to work on.
He is also making two assumptions:
1) That having a bigger stop and therefore bigger open losses
will not affect his trading composure and performance (how do you
feel if you are risking $10?? $100?? $1000?? $10,000?)
2) That he would have held on to his profitable trade until he
gets an exit signal (it is easy to assume after the event that we
would have got out at the very best moment)
The truth is we are all much weaker than we would like to
assume. The biggest challenge to profitable trading is sticking
to our own self-imposed loss limits, be they on a per-day or a
per-trade basis. What this trader did on this day was stick to
his limits, which is highly commendable; he was just having
difficulty accepting his results. No one likes losing money and
no one like being wrong, but to be successful in trading we have
to be accepting of both.
Malcolm Robinson
LIFFE Pit Trader & Electronic Trader
InstinctiveTrader.com
 MORE RESOURCES updated Mon. December / 04 / 2023
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RELATED ARTICLES
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Margin Spreads
One of the best kept secrets in trading is that of reduced
margin spreads. You cannot name a trading method that
provides more safety or a greater return on margin than
does a reduced margin spread, while also being one of the
least time- consuming ways to trade.
Forex Currency
Trading
It is possible to buy and sell money from different
countries on the foreign exchange market called Forex.
Forex currency traders can profit by taking advantage of
the dips and swells in the foreign currency market.
The Secrets of the
Super-Traders
The first and perhaps most important "secret" is to realize
that your methodology or approach (no matter how good) is
only part of being a highly successful trader. This applies
to any trading style including, day trading, swing trading
or position trading.
Forex Signal
Services
What are Forex signals? Forex signals are paid services
offered by some brokers and independent Forex annalists.
Companies that offer forex signals monitor and analyze the
market for you, providing you with their data via desktop
alerts, email or even SMS and pager alerts.
Sending Signals for
Trading in Forex
Forex signals are sent by a forex firm to their subscribers
in order to buy and sell currencies. These signals are
called entry and exit signals for the forex dealers.
A Beginner's Guide to
FOREX
FOREX is the abbreviation for the Foreign Exchange market.
FOREX is basically an international exchange market where
currencies from all over the world are bought and sold for
profit.
How To Control Fear And
Greed In Trading
There is an old saying that the market is driven by fear
and greed. Anyone that has placed more than a couple of
trades will surely have experienced these two emotions.
Money Management - The
Holy Grail Of Trading
Money management determines how much to risk on each
individual trade. This is a vital element of any trading
system - risk too much and the chances of going bust are
too high, risk too little and the reward for trading is too
low.
Internet and Computer
Systems in the FOREX Business
With every passing year the interest in electronic trading
is bigger, more especially trading shares and currency
through Internet. A new profession came forward - this of
the currency dealer.
Money Management, Part
2
FEARING LOSSESThere is a huge difference between being risk
averse and fearing losses. You must hate to lose.
A Look at Online Forex
Brokers
An online forex broker is a firm that facilitates retail
trading using Internet technologies. Global Forex Trading
(GFT), one of the popular online forex brokers.
How Currencies are
Traded in the FOREX Market
Currencies are traded in dollar amounts called "lots". At
100:1 leverage, one lot is equal to $1000 which controls
$100,000 of a given currency.
What are Your Options
Regarding Forex Options Brokers?
Forex option brokers can generally be divided into two
separate categories: forex brokers who offer online forex
option trading platforms and forex brokers who only broker
forex option trading via telephone trades placed through a
dealing/brokerage desk. A few forex option brokers offer
both online forex option trading as well a
dealing/brokerage desk for investors who prefer to place
orders through a live forex option broker.
Option Arbitrage in the
Forex Market
What is arbitrage? Arbitrage is the simultaneous buying and
selling of identical financial instruments taking advantage
of price discrepancies between different brokers,
exchanges, clearing firms, etc. and thus locking in a
profit.
Why Demo Account
Performance Is Often Better Than Real Account
Performance
Over the past several years, the popularity of online
currency trading has grown substantially. Each day, online
FX brokerage firms attract new investors - each of them
lining up with a glint in their eye, lured in by promises
of easy money.
Mechanical or
Discretionary Trading - Which is Best?
Discretionary Trading. Pure discretionary trading will rely
solely on the traders judgment. For example a
discretionary trader may spot a particular pattern
developing on a chart and decide to enter a trade on that
basis.
Two Timeless Rules in
FOREX Investing
RULE #1) ~ Cut your losers; let your winners ride. One
important thing that every new trader must know before
entering this highly profitable business is that life is
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one fact: YOU WILL HAVE LOSING TRADES.
Disgruntled
The following situation happens quite often to many
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you: You have been faithfully following your trading plan
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Don't Deny
Reality
If you want to be a successful trader, you must make sure
you do not deny reality in any phase of your trading. You
cannot deny losses, price direction, mistakes you make,
being undercapitalized, or a whole host of things you would
rather not think about.
How To Handle A String Of
Losses
Everybody hates to lose and unfortunately no one is blessed
with the ability of foresight, therefore losses are an
unavoidable part of trading. When we enter a trade we will
either be right, or wrong, and even if we broke-even we'd
still be classed as being wrong - as nobody enters into a
trade just to break-even! When unsuccessful traders
encounter a string of losses they begin to engage in
self-destructive patterns that help them escape the pain
they are experiencing.
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