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maneuver. Everyone has or will develop an individual trading style. Regardless of that style, discipline must be maintained. |
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I cannot say enough about the importance of discipline in order to be a successful trader. When real estate moguls reveal the secrets of making millions in real estate, the three secrets are always location, location, location. The reason is that keystone real estate usually keeps its relative value. In Direct Access Electronic Trading the secret is discipline, discipline, discipline. |
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I could recite a great number of platitudes like "Your first loss is your smallest," "Health makes wealth," and "Early to bed, early to rise." None of these self-truths is eternally valid because there is always an equal and opposite adage to counter the first maxim. Take your pick. For example, "Should one act in haste and repent at leisure,'' or "Does the early bird get the worm?" In truth and in fact, the eternal discipline in trading is to cut your loss prudently. If the market turns adverse, you must take your loss or scratch a trade. No ifs, ands, or buts. No maybes and no praying. Just fold the hand like you would any bad hand in poker. |
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Once a decision turns adverse, any more money or time invested in pursuit of rescuing that decision is a vanity that you cannot afford. You are then preoccupying your concentration and populating your life with lose-lose decisions instead of pursuing winning strategies. There is nothing personal about the situation. The market doesn't know you and doesn't care how you feel. So don't take losses personally. If the market turns adverse, it has nothing to do with you as an individual. |
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I know that my advice to cut your losses immediately appears to conflict with my other advice about being a parameter trader and holding a losing position a tad longer than normal in order to avoid being wiggled and jiggled out. Both pieces of advice are reconcilable because each is appropriate at different points on your learning curve. At the beginning of your DAET career it's best to take your losses quickly for purposes of discipline and control, because you won't have the product knowledge to identify the reasons behind the adverse |
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