Aiming for the Right Target in Trading by Walter T. Downs
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When trading goes forthwith, it can be a great feeling. When trading goes wrong it can be a nightmare. Fortunes are made in a matter of weeks and lost in a condition of minutes. This pattern repeats itself as each new generation of traders hit the market. They hurl themselves out of the night like insane insects against some kind of karmic bug-light; all thought and all existence extinguished in one final cosmic “zzzzzzt”. Obviously, for a dealer to be successful he must acknowledge this pattern and then break it. This can be accomplished by asking the right questions and finding the correct answers by wise observation and logical conclusion.
This article will attempt to address one question:
“What is the difference between a sweet trader and a losing trader?”
What follows are eleven observations and conclusions that I use in my own trading to help keep me on the right oversee. You can put these ideas into table form, and use them as a template to determine the probability of a trader being successful.
OBSERVATION # 1
The greatest tot up of losing traders is found in the short-term and intraday ranks. This has less to do with the time frame and more to do with the fact that many of these traders insufficiency proper preparation and a well thought-out game plan. By trading in the time frame most unforgiving of even minute misprint and most vulnerable to floor manipulation and general costs of trading, losses due to lack of knowledge and lack of fitness are exponential. These traders are often undercapitalized as well. Winning traders often trade in mid-term to long-term time frames. Often they release greater initial levels of equity as well.
CONCLUSION:
Trading in mid-term and long-designation time frames offers greater probability of success from a statistical point of view. The same can be said for upfront of capitalization. The greater the initial equity, the greater the probability of survival.
OBSERVATION # 2
Losing traders often use complex systems or methodologies or rely to a T on outside recommendations from gurus or black boxes. Winning traders often use very simple techniques. Invariably they use either a much modified version of an existing technique or else they have invented their own.
CONCLUSION:
This seems to fit in with the mistaken belief that “complex” is synonymous with “greater”. Such is not necessarily the case. Logically one could argue that simplistic market approaches tend to be more practical and less prostrate to false interpretation. In truth, even the terms “simple” or “complex” have no relevance. All that really matters is what makes banknotes and what doesn’t. From the observations, we might also conclude that maintaining a major stake in the trading process via our own thoughts and analyses is superior to being successful as a trader. This may also explain why a trader who possesses no other qualities than patience and persistence often outperforms those with advanced cultivation, superior intellect or even true genius.
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