Monday, 27 February 2012

Good advice

I received a comment on a previous post yesterday and I thought I would share it with you as its very valuable to a newbie trader (me included),-

'This is a very consistent outcome for a large amount of traders and one you can overcome. I have seen so many people get the basics right, start really well and kick on for a month or two and then one of two things happen. They start to aim too high or the discipline loosens. And that results in a loss. Once that loss comes the confidence is knocked and they have a bit of a panic. Some people at this point will raise the stakes to recover the loss and get in more trouble or worse still they will win the money back. If they win the money back, they feel a bit invincible and think if they get in trouble again they will be able to get out of it and so the discipline falls further. It is extremely depressing to come back the day after the big loss and that is why it is so important to avoid them. But when faced with a winning position, people can easily accept a win and exit, they become risk averse. They don't want to lose what they have so they take it. When faced with a loss, people become risk seeking and will risk further loss to avoid the one they are about to suffer. It is a well known reaction and has been studied and proven to be the case. You can come back. You need to have some time off, about a week, reload and start again with a new perspective. Take your profits quickly and your losses quicker.'

The comment came from the badger and he is one of much knowledge and experience and I would like to say thanks for taking the time to share your thoughts with us.

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