Before we get into the presentation on where we are today, I would like to read to you some points from a study from 500 brokers that covers some 10,000 futures traders and it ranks as a list why traders fail. I am going to read only a few of these
because they are pertinent to what I am going to say in my presentation.
Remember this is from a study on why new traders fail:
---- They trade without a plan
---- They do not define specific risk or profit objectives before trading.
---- Even if they do establish a plan, they second guess it and don’t stick to it.
Note: That is why Woodie likes to trade without prices because prices scare you
and you change your plan.
---- That is particularly true when they have a loss (they don’t stay with plan).
Consequently, they over trade and they lose their equity.
---- Usually they liquidate their good trades and keep the bad ones.
---- They often fail to take a pre-defined risk – they add to a losing position and
fail to use stops.
GB Note: I never trade without a stop unless I am swing trading. If I
day trading, there is a stop in there very time.
---- New traders who fail often have a directional bias. They come to the session in
the morning and because of some news item, they have a directional bias to be
long all day long. That will kill you in day trading.
---- Many traders break the cardinal rule: Cut losses short and let profits run.
---- Many traders will trade with their heart instead of their head. For some traders,
adversity or success distorts judgment. That is why they should have a plan and
stick to it. In my opinion, many traders hold a loser too long.
---- New traders do not discipline themselves to take small losses and big gains.
Note: How many times have you heard Woodie say that, “Don’t get in the hope
mode!” That leads to the what so ever mode and that leads to dammit
mode.
---- Lack of discipline includes several lesser items: For example, impatience and the
need for action. For me, that means if I haven’t had a trade for 3 hours and I
am getting bored, and I am looking for something to do. I see something that
looks kind of good and I press the buy or sell button. Usually things don’t turn
out too well when that happens.
The next two are two that I feel strongly about.
---- A lot of traders trade against the trend. In the CCI that is when you have 5-6
bars above or below the zero line – without reasonable stops. For me, that is
something I will not do. I will not trade against the trend – except for a couple
of specific trades.
----There is a striking inability to stay with winners. Most traders are willing to take
small profits and therefore miss out on the big profits. For instance, you get 2-3
points profit and you get concerned it might go away if you wait too long
so you get out with your 2-3 points.
These are some things about people who are just starting out that I wanted to share with you because they are germane to what I am going to say from here on.
Many of my comments today are based on my own experience and also the experience from talking to many other traders. I talk to a lot of long time traders.
I am going to throw out quite a few numbers at you. I can’t necessarily prove that they are right, but I believe them to be true. I know from talking to Woodie and Carolyn that we all pretty much agree on these numbers.
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