If only all trades were successful, if only all investments went up. Wouldn’t that be great! Of course, the reality is that this is an impossible feat. No matter if you are investing for the long term or trading in the shortest time frames, there are inevitably losing positions.
It’s how you deal with the inevitable loses that makes the grade. It’s how you manage your trades, or your investments that decides if you are going to be a winner or a loser in the long term.
The truth is, no one knows which direction the market is going to go, particularly in the lower time frames, there are just too many variables, from disasters to economic news etc..I could go on. So the best we can do is develop a systematic approach that manages our risk and give us a positive expectancy over a period of trades.
I became a trader as investing for the long term was too slow in terms of capital appreciation, and I simply didn’t want to hold onto an investment that was going south on me. Not that there are no merits in long term investing, I think Warren Buffet stands as a beacon that it works. However, I don’t want to be looking to make stock market returns or slightly better, I want to knock it out if the park while managing my risk very carefully.
As I said, there will always be losing trades, but they key is to anticipate the big mega moves that happen. A few or more times per year huge trends show up in every market and it’s my job to get in early and ride them till the trend is over. This is the philosophy that the HowDoITradeStock.com system is built on “Let your winners run, cut you’re loses short”.
Just as the picture in the post shows what success really looks. The same is true in terms of ultimate success in the stock market, it is not a straight path. But I firmly believe that with a proven system, you can invest with certainty, the certainty that success will come, albeit via a winding path.
Just like the story of the tortoise and the hare, too many people are trying to get rich fast. YOU CANNOT GET RICH FAST, it just about always leads to ruin. You must slowly and steadily compound your money by using a system that has extremely good risk management, wins more that is loses and when it does win, the winners are 3 times the size of the loses.
However, even more importantly avoids the potential for “Murphy’s Law”. Murphy ’s Law being, what can go wrong will go wrong. This law is alive and well in riskier assets and strategies that are difficult to manage risk in. I am pointing to things such as Futures, Forex and Options trading. The lure of the small amount of money growing at a tremendous pace to make people millionaires in a short time frame…simply doesn’t work!
As an emotional human being, (in fact, sometimes an emotional basket case when my trades are going against me!), it’s difficult enough managing my risk in diversified, relatively slow moving ETF’s as it is without trying to manage my trades in a extremely fast moving environment like, Futures, Forex and Option trading. These market places are not for the faint of heart and 90%+ of people fail trying to trade them, not because of a bad strategy, but because of the speed at which these markets can move against you.
I am of course talking purely from my own experience and from my own observations over the years, it’s your money and you can decide what to do with it, but if you want certainty, and I mean a certainty that you will be able to follow a system without feeling like you can’t sleep at night, then I would encourage you to take a look at what we are doing here at HowDoITradeStocks.com.
It’s not perfect, as no system is, but it does know how to win via the winding path. therefore, no matter what the market throws at me, and in-spite of my emotions, I already know that 2015 is going to be my best year yet. Stay safe and good trading!