Sunday, November 18, 2007

"15 is the number" weekly report

We were able to bank +134 pips this week..What a wonderful week:)
Of course we expect the same situation will happen for future weeks ahead.
To learn something is a must and by reading or listening someone's words may enrich
our own knowledge, and the best thing is, without having to experience it ourselves.
I subscribe a post by Ryan Jones.
He's an expert in trading business, here's one of his articles. Hope you get something.

Sometimes there are hard choices that have to be made.  The key is to
make them fewer and further between, and to make the ones that do have
to be made, easier. To accomplish this takes preparation. It is a hard
choice for an alcoholic who has trained his body to crave alcohol to
not take the next drink. But let me ask you, would the choice to not
take the next drink been easier BEFORE the body became almost seemingly
dependant on it?

Maybe, maybe not. Studies show that most alcoholics became abusive
with its consumption in order to deal with other things in their lives.
As a result, alcohol becomes a tool to help deal with other problems (or
not deal with them as it would be). But the truth is, the abuse of
the substance became an ADDITIONAL problem instead of a help to the
problems that already existed. Further, the original problems probably
compounded as a result of not dealing with them in the first place. So the
whole thing snowballs.

As it goes with life.

We all make mistakes. Preparation for future hard decisions is based
on making less hard decisions early on.

When you decide to trade something without having a trading plan in
place, without having taken the time to understand the importance of
proper money management (and I'm not talking about knowing where to place
stops), or without really going through any preparation for when the bad
times come, many things happen.

1. The lack of a plan means that you react to a situation usually
based on emotions than careful thought of the consequences.

2. Not understanding money management probably means that you over
traded, or did not trade in an efficient manner. The probability of
someone guessing the best trade size is almost non-existent.

3. Not preparing for the bad times causes many traders to abandon a
strategy long before realistic expectations require such action.

Result = Losing experience.

The choices are these:

1. Take the extra time to educate yourself on how to properly create
a trading plan, or just jump in and start trading.

2. Take the extra time to understand the importance and proper
application of money management (trade size), or just jump in and take the
first suggestion you can find on the internet.

3. Take the time to understand what has to happen in order for a
trading strategy to suffer a severe drawdown (based on your risk tolerance
level), or start trading immediately in hopes that it won't go into a
drawdown right away. (Which, by the way, has a 65% - 80% chance of
happening... but most traders don't realize that).

The latter choice in each of these is obviously the easier one to make
NOW because we have trained ourselves to go for the immediate
gratification choices. Ending the trading venture in losses is not a
consequence that too many traders dwell on BEFORE they start trading. It is
usually not until they are in the middle of the losses that thoughts start
to consider this possibility and prepare for it. But by this time, the
choices are usually harder than they would have otherwise been, and
more driven by emotion than any objective standard.

Another example is a trader who has a stop loss order associated with a
position, but decides not to implement that order because they think
the market is going to move in their direction. They focus on the
winning side, not the losing side. But, as the market moves through
the stop loss price and their loss is getting bigger and bigger, it is
harder and harder to make the decision to cut it off... because they
don't want to take the loss. The bigger the loss, the harder it is
to accept. Before you know it, they are forced out.

Make the harder choices when they are easier.

And that is the Truth About Trading.