iCharts Discussions

SwingTrader · Posted: Sun Jul 29, 2007 9:59 am Post subject: Typical novice trader

Please read this article: http://timesofindia.indiatimes.com/India/I_lost_my_sanity_for_3_months/rssarticleshow/2241359.cms

This is about a guy who lost all his money trading commodity futures. He was a daily wage earner and then on the advise of someone got into futures trading and lost everything and more. He is now repaying his debt. The funny thing is HE NOW WANTS TO MEET THE PEOPLE WHO STARTED COMMODITY TRADING AND SETTLE SCORES WITH THEM.

I really get irritated when I hear such stories. I feel he lost money because he deserved to lose and not because commodity trading exists. First of all he had absolutely no business to be in futures trading without preparation - he had no knowledge of trading, he almost certainly had no idea of risk management, he was not trading with RISK MONEY which is important in trading. Only a fool would trade with money that he cannot afford to lose. He probably thought he was making a fixed deposit in a bank when he put all his hard earned money (and more borrowed money) into commodity futures. THE ONLY PERSON HE SHOULD BLAME IS HIMSELF.

I urge novices who are trading to first get educated in this field. People get wiped out in few mins here. Risk/Money management is very very critical. Those who swing a big position without understanding the risks might make money once or twice but they are almost certain to get wiped out.

I hope I did not hurt feelings by posting this rant but these are cold hard facts. I hope traders spend more time working on their risk/money management strategies instead of working on refining their trading strategies/trading systems. Ultimately if a trader has to make money big time in the markets he will do so ONLY DUE TO HIS SUPERIOR RISK & MONEY MANAGEMENT AND NOT BECAUSE OF HIS TRADING STRATEGIES. If you ignore risk/money management you will end up one day or the other like the guy above.

Take care.

kumarsanjai · White Belt Joined: 14 Jul 2007 Posts: 3

dear swing trader sir
u r absolutly right. one should follow this money management which i m telling u .if a day trader then he should keep max to loose only 2% of his capital.if sort term the max 10% of his capital.

sssmoorthy · White Belt Joined: 03 Apr 2009 Posts: 4

Else you can keep a minimum of absolute amount ( say Rs. 500 or Rs. 1000 per day) for per day loss. If a loss to the above scale, one should stop trading. Discipline is very important to this game.

Trade with cool mind - sssmoorthy

sunsoft.Tech · White Belt Joined: 02 Apr 2007 Posts: 4

A must read for all traders:
Trade Your Way To Financial Freedom by Van K. Tharp.

This book discusses trading psychology, Money Management and Position sizing. Most of all it shifts our paradigm.

athani · White Belt Joined: 19 Jun 2009 Posts: 6

I'm a little confused here.

1. I have been told thay you should have the discipline to follow your trading system's signals in spite of previous losses - because you never know which of the trades could be the winner of the month.

2. Say for example you have a trend following system, and you get few losses in a row due to sideways market whipsaws, and you stop trading for the day. Then the market starts trending, but you ignore the entry signal, as you have stopped trading for the day. The market doesn't look back thereafter, leaving you standing by the wayside.

So don't you think that you should have the discipline to take each and every trade as indicated by your system, inspite of the previous losing trades? Request senior traders to guide.

neemtree · White Belt Joined: 20 Feb 2009 Posts: 43

the ebook can found on the net @

http://forexcare.net/Ebooks/Trade_Your_Way_to_Financial_Freedom.pdf

Thanks,
Srinivas

Garsit0Pfaff · White Belt Joined: 20 Aug 2009 Posts: 7

That's why the only rule that I ALWAYS stick to is never to invets more than I can afford to lose.