Having a sane mind while trading the stock market depends a lot on having realistic expectations. Trading the market is like running a business. When we open a trading account we are actually starting a business. A business needs a solid plan and capital to start and keep it running. It needs time to grow, can book losses and can have profits. It should have accounting & auditing, compliance requirements, risk management practices. Each one of these aspects of a business applies equally well to trading.
However some aspects of trading as a business is quite unique to it. Unlike any other business trading is very easy to start. Today it takes around 10 minutes to get on boarded with a stock broker and account gets activated with in a day or two. With some stock brokers we donāt even need to pay anything for this process. Then it is possible to quickly avail funds analogous to secured (pledge holding) or unsecured debt (margin funding) even for credit unworthy individuals. Outside for a business to get loan it has to go through a strict vetting process and prove its credit worthiness to access debt funding. Last but not the least while a typical business can take time to book profit or loss the trading returns are instant.
Do not dive into trading if you cannot make peace with the reality about trading pictured above. You are likely to fail as 90% of the startups do in the very first year.
You must stop trading when your plan doesnāt work the way it should. If your losses are more than were anticipated in backtesting, you must stop. The market is volatile and you may not understand all that it does. Itās okay not to trade for a while and prepare your mind for that.
The market is not easily predictable. No matter how hard you try, you can never be 100% accurate at determining the market movements. New traders think it to be the Holy Grail and keep taking risks without realising that they are losing their capital.
Itās the eagerness to make money that ends their careers before starting. The advertisers do an exceptional job at making people believe that they will be able to make money easily through trading.
Lot of children go to the street or ground to be the next Tendulkar. But not many believe like he did or work like he did to be him. This is same with trading or any other field.
There is certainly the element of chance or luck but that will be found only if one is persistent on a path towards a goal.
Whoever told you trading is like that ? There is enough money in the market for everyone. There is no competition here. Nobody is competing against each other.
The big bad wolf are the banks, big institutional traders , hedge funds that love crushing the retail traders. They trade completely opposite against retail traders. They have enough capital and influence to manipulate price. So itās basically a warfare more like sniping in a battlefield where you are patient, disciplined and silently picking off targets and nobody knows you are there. Thatās why technical analysis is better than fundamental analysis because you are literally under the radar riding trends and disappearing when prices are manipulated.
But the real problem for over 90% is plainly due to bad money management, going crazy with leverage & worse risk management. If you just held onto money management you can make some 2 to 3% definitely for sure.
Mine wasnt quite great compared to nifty 50 benchmark ! I am a trend trader and trade using technical analysis
Below was my MM based on what prop firms set
risk :- 2% of capital
DD:- 10% of captial
Made :- 6% at end of 4 months.
Nifty 50 gives 10% average just simply sitting and doing nothing so I wondered what am I doing trading so I bought some index funds for time being.
There is one thing with my system is that I am still searching for a good volume indicator and have to forward test with leverage and put it together. These things take time and I have regular job so it was hard managing.
I am still researching these systems ichimoku , heikin ashi and renko and hope to find a better efficient system
I am stressing on a philosophical aspect here. If one has to do good at something first they have to believe. Then they have to persist to make that belief a reality.
But lot of psychological aspect plays a bit too. I mean from my experience just looking at your account go up and down is a horror show for the many people . It plays insane tricks with our brain and literally derails us from MM for sure. I think making that mind shift is very significant.
First time is getting started and properly demoing and having truest paper trading
Making a shift from to trading money after demo.
I think for anyone to make the shift , probably recommend to do paper trading currency pairs then trade with real money (some of them will lose and is okay to lose less money there ) . Thatās how I did it getting over that rumious feeling of losing.
But the real biggest risk is simply not taking any. Even if you are not trading atleast someone needs to invest . After all Investing is just plain old buy and hold for longer TF like trading.
Really helpful post with all genuine information. It is true that peopleās emotions are the main cause of loss. Also, very few know about the real meaning of diversification.
I think itās because most traders are not focused on developing skills that will serve them for the long term. Most new traders are chasing the quick gains and enter without a plan. And those who enter with a plan donāt stick to it for longer as they get blinded by greed and forget everything else. Being consistent would require a disciplined approach along with skills. One needs to have patience and a clear mindset to be consistent as a forex trader.
You may have a trend trading system but you can run it only as a game. Game means you put a portion of capital at risk when you loss you loss small. When you gain you gain big. In such a system your probability of profit will be less. In short buyers make money but number of profitable trades are less. When they win they win big.
Some season markets support buyers some season markets support sellers.
I am a small trader, trade with 1 lot. Tis is my last friday trade. This is a perfect example of trading rule. Small win ,small loss, big win allowed but never make big loss. I strictly follow it.
On a day like last Friday, seasoned traders were harvesting truck loads that would last them an entire year and you managed to harvest an handful that could last a couple of days.
Good that you managed to harvest a few, but this is not a good example in trading terms.
You say as if everyone trades in the same way and every day is same for all. Those who trade reversals would be happy. Trend continuation/Breakout guys may be less happy. Even trend depends on your timeframe. He did not even give his capital amount so you cant say if its big profit day for him or not.
Anyway, any single day is more or less random. Boasting or crying about it is just emotional baggage that comes with trading and neither state will last long in medium term.
Small win small loss big win is not an edge on its own and not even requirement of an edge. Most type of edges will probably fit that, but not always. People who trade Mean reversion, for ex in US markets which have more mean reversion in them, can have high win rates and larger losses vs wins. There is a long time trader who does not even use stop loss with this kind of system as stops always makes it worse for him, he was in latest market wizards book too. he manages risk at portfolio level rather than per trade. So do what works and manage risk.
