16 Mar Make money by losing money
Say what now?!
When I first started getting into trading I was looking at how I could make money the fastest. A year later I understand I was looking at it wrong. Of course we all want to make money. That’s why we’re trading. The thing for me was that I was doing something right from the beginning because I was making money here and there. This was definitely more luck than skill. It was just that I would make a bit of money and then have one huge losing trading that would wipe out my winnings and then some. So what changed?!
I am very hard-headed. If I don’t learn and find out for myself, I don’t really adopt a lesson. That doesn’t mean I won’t budge from my point of view in a discussion. Discussions are different than learning a new skill. When learning a new skill I go deep into finding out what works, and what does not work. I’ll read a lot on the subject and then will go out and try things. But, and yeah I am tooting my own horn here, what I do best is observing. I come up with ways to measure what I am observing and draw conclusions from them. This is so much more valid than anything anyone says. I don’t care who that is. If you are going to ‘master’ anything. It should be your voice that you listen to.
OK OK calm down. You’re awesome. We get it. You were saying?..
What I am really saying is that I made a lot of mistakes. I like to think that every mistake got me closer to my goal. Guess that Edison guy was on to something with his light bulb huh. Here are my mistakes and SPOILER ALERT nothing new that any of the professional traders aren’t talking about. For me there are two main culprits:
- Impatient with winners, patient with losers.
- Taking ‘intuitive’ trades.
Be patient with winners and impatient with losers
But what do we do? As soon as we start seeing a green P/L we get impatient and want to close it. More than not we go right ahead and take profit too soon. Then when a trade goes against us we try to justify the position and that it will go back in our favor. So much patience we got with losers. So we take with tea spoons and give back in buckets (more like a digger). I’ll get to how you can overcome this later on. Since it is all related to each other of course.
You’re so smart
If it’s one thing I like to tell people is that I am so smart. Like really smart. Basically, smarter than you… You oh and you… YOU YOU YOU. YOU get the idea. I don’t think I do it on purpose it is just a character flaw I have built up over the years and before I start crying my guts out on my bad childhood… As you might have noticed another flaw of mine is that I tend to stray from the point that I’m trying to make 🙂 let’s get back on point. This arrogance will kill you in the marketplace. You are not smarter than the market. The market giveth and (more than not) the market taketh. It is your job to understand how the market works and try to hop on at the right moment so that you can take a profit. You won’t do it right every time but you’ll get the hang of it. This also means you have to understand when you’ve made a mistake. If you are trading a certain setup, then trade THAT setup. Once it breaks the criteria of how the pattern should be behaving GET THE F*** OUT. On to the next one. So this then brings us to your criteria. Only you can decide what this should be. I could teach you my patterns. But they’re mine and I don’t like sharing! BOOHOO!! Just kidding. I’ll be happy to share them with you but you’ll have to message me directly and I’ll be happy to teach you my patterns. Although having said that. I do believe that you should and you will come up with your own patterns if you just stick to observing the market long enough. It will happen. You just want a shortcut and there’s nothing wrong with that. It’s just that there’s a lot of people charging a lot for these shortcuts. Some work, 99% are BS. And I am too cheap to pay for anything (not true) but I don’t know which one is actually worth spending my hard-earned money on. Plus like I said before. If you want to master something you have to make it your own. How do you make it your own? You dive in deep and let go. Be one with the subject 🙂 Probably drank too much coffee I’m a bit all over the place.
Stick to the plan
So stick to the plan. Set up your criteria for your setup and stick to it. Once it breaks the pattern, get out. Set a profit target, set a loss target. I don’t set a certain pip amount for my losses. I look at the pattern. Did it break the pattern? I’m out. I do set a profit target. Which in most cases is 3 pips only. More than not I have seen it go to 4 pips and then only to return. So this really depends on what pattern I am trading. If it’s a high probability setup I’ll take more profit. Another thing I like to play around with is the position size. Not every setup is created equal. And your targets should be adjusted accordingly. Trade the plan and don’t take trades because you had a feeling. More than not these don’t work. You will build up a ‘feeling’ for the markets but that doesn’t happen in a year. Give it time.
So many traders say that you shouldn’t be emotional when trading. This way you can stay clear-headed and trade your plan. That’s all fair and good but they rarely tell you how to go about it. Gather around people!! I’ll share this huge secretive secret ONLY with you and all at a hugely discounted price for FREE. Why?! I hear you asking?? Well… because you’re my friend! Right?! 🙂 Alright alright. Note to self. Don’t drink so much coffee. OK let’s get on with it.
- Come up with a trading strategy/plan/setup.
- Test it out by trading the smallest contract size your broker allows you to trade.
- Grow confident in your setup.
- Losing money in your setup? Revisit point one and work on your setup.
- Making money? trade a little bigger.
- Keep doing this until you make the amount of money you want in a day/week/month/year.
When you trade small contracts, chances are that your losses will be relatively small. That small that you don’t really have a feeling about it. This is what you want. You’ll start seeing that sometimes your positions go against u before going in your favor. You’ll learn all these things that are valuable to learning how your setup works and how to tweak it further. This is priceless (although you are paying money for it though but whatever, shut up!). Set a goal for yourself before you increase your position size on your setup. For example. Go from 100 Euros to 150 Euros and then increase position sizes. Then go to 200, then 500, and 1000 and so forth. You get the picture. Come on. This way you’ll learn how to lose money in a structured way but feel OK about it. Because you have confidence in your setup. Distance yourself from the money in the process and grow into a stone cold heartless killer! Uhh trader 🙂
Thank you for reading
Let me know what you think about this and how you handle this. What were your mistakes and how did you overcome them? Troll me. Call me stupid. Do whatever you like. Just contact me. Please?! Anyone there? Some one? Any one? Do cats read? I’ll take a cat.