Important NOTE: With The Recent Volatility Across Markets, We Have Seen Margins Increase In Some Markets As Well As Wild Swings And Extreme Volatility In Many Markets.
For Some, It Can Cost The Full Account Value But Doesn’t Need To. These Volatile Times Require MAJOR Adjustments In How You Approach Trading And Risk Management. I Hope This Article Helps And I Encourage You To Utilize Our Brokers And The Knowledge They Have To Assist You.. Contact Us
Many different factors go into trading. Too many to discuss efficiently in one blog post. Some relate to trading techniques, other to money management, mental aspect, risk capital and much more.
But one that sticks in my eyes is the inability to accept a loss. I see many clients who can make money and have days where they make money but when they lose, they lose much more, sometimes even losing control and losing a big portion of their account.
I am not sure how a trader can embed this into their trading mind, BUT in my opinion if you train your brain to expect losses, understand losses and that losing days will happen, you will increase your chances of surviving in this business, which in return will actually give you a chance to succeed….
Losses are part of trading and as long as your losses are part of the plan and are quantified in advance and you can adhere to your rules, then you have a chance. I think it’s easy when traders are winning…making money etc. Much harder when you lose or down. your brain starts playing tricks on you…it tells you to double down, maybe reverse even though your analysis does not say so….all of a sudden you start pulling trades out of instinct, fear rather than a calculated plan that has solid risk/ reward.
If a trader learns how to lose, to accept losses, to have realistic expectations, then he/ she can avoid having one of those terrible days when traders can lose almost of all their account.
Also, while a bit easier in my mind, a day trader should also step away when he reached a predefined profit target for the trading day. In my humble opinion, the more you day trade, the more fatigued you become and larger chances for errors.
I went into this subject and detailed day trading money management in an article I wrote a few years back for SFO magazine.