Archive for February, 2008

The first objective should not be making money.

A few things I am learning, just writing them down to remember :

Stay alive. Trade small. Have low expectations. Limit your losses.

Trust in chaos ! By definition chaos is a nonlinear order. Prices follow a nonlinear order and tend to stay within defined channels or trading ranges. When they raise above or below the range they enter in an area of disorder. Big money can be made when you learn to spot the limits of chaos.

Trade with the trend. Trends might last many months. Keep an eye on your chart following your trading rules, believe in charts not the talking heads, facts not opinions.

Avoid undercapitalization. If you do not have enough money do NOT trade, period.

HOW TO FAIL, trade with: Lack of money management. Lack of a well defined trading plan. Inability to pull the trigger. Inability to admit you are wrong. Reasons that have nothing to do with trading, such as thrill and hope to make quick money.

Three great forces rule the world: stupidity, fear and greed. –Albert Einstein

I was about to sell my whole line of stock, but I got greedy and was not able to sell because the price I asked was way too high than the price offered. Not only I did not make a good profit, but now I can’t even make any profit since everything went suddenly back down.

I did not understand what type of market I was facing. There was a 20% gain in one day on my new trade and I did not take it ! Now it’s gone, it was stupid of me. I did not even have a trailing take profit. I am still too emotional and I won’t last, unless I work on taking some emotions away. Taking away all the emotions is impossible, but a detailed trading plan should be written and followed.

Easier said than done.

Here is what successful traders do:

Look at trading as a business.
Are disciplined in their personal and professional lives.
Never enter a trade without knowing their exit strategy or a trading plan.
Understand the risk and the game they are are playing.
Accept that they will make mistakes and learn from them.
Never risk money they can not afford to lose.

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