This blog was first appeared in the http://www.tradersaintforum.com
Adherence to stop losses is important and vital, but allowing a trend trade to run its course
before tampering with it is as important, if not more………Let us take another
Trader. Unlike our Trader friend above, this Trader is more disciplined, more
ruthless. He knows the importance of stops, he realises the importance of his
capital and its preservation,…….he therefore adheres to his stops. Not only
does he adhere but he realises that stops are to be placed at vital points
(talking Tech Trading). He takes on the Market and after 10 trades, he makes 5
losses, and 5 wins i.e., 5x-5x=0.He has lost commissions, and misc. charges and
have nothing. His next 10 trades have 6 losses and 4 gains…all gains are about x,
and losses at x each. He ends this on a losing note as well.
This Trader has
gotten it better than the previous guy……..he is following half the Wisdom and
finds himself perennially at Breakeven to Mild losses. After 20 such trades, he
realises that his fallacy was in placing stops in the first place. The next 10
sees him hurtling down and joining the previous Trader in his ranks……..what has
happened is a slow breakdown of the discipline by the Market, which is nothing
but a Totality of Minds in action. Frustrated and disappointed, he thinks that
his fault lies in the method, his system, and runs around in circles collecting
various indicators to find the Holy Grail.
So too, at the end
of the month, when we look at our Trade Analysis, we kick ourselves for not
adhering to our stops……We notice instantly that our stops of x was not adhered
to a few times and that led to the downfall in that month…….Nothing could be
further than the truth. What the Month end analysis does not show is that the
profits earned of say x or 2x was in a move of 10x or 12x…..to put it crisply,
we did not capitalise on the move. Not capitalising sends the mind into Regret.
Regret sends the Mind into Wrong Decision. Trades are taken when they should
not have been. Stops are placed at incorrect points. Multiple useless,
unnecessary trades are put, and the broker instead laughs all the way to the
bank. Even if stops are taken, the trader does not make enough to cover the
losses sustained. Sustained lack of victories sends the Mind into Defeat Mode
and he then finds every possible way to shoot himself in the foot…..
The Wisdom of the
Ancients has always been to cut the losses, and to ride the Profits…..Somehow, the
2nd half of that great wisdom stands neglected……Obey that Wisdom, and great
profits follow. Neglect it, and Peril will follow in a matter of time.
About Author
Dr. SREEKUMAR
RAVINDRAN
Founder and Chief Managing Director at Tradonomix
Dr. Sreekumar
Ravindran, known as Saint in trading forums such as Trader Saint Forum &
Traderji, is the visionary and mind behind Tradonomix. He is a passionate
trader himself and has spent over 15 years in researching and accumulating
knowledge of trading and applying the same in real-time.
Dr.
Sreekumar strongly believes that trading is a learnt skill and that awareness
needs to be created for trading as a profession for the common man. Tradonomix
is one of his first steps towards this belief, from where he intends to take
Tradonomix to an advanced technology-driven social platform for learning, and
achieving financial independence.
