Discussion in 'Psychology' started by novice, Aug 27, 2009.
Yeah it actually helps in getting less risks and losses.
Trade what’s happening and not your predictions. The predictions might be interesting but the vast majority of them either go wrong or are so poorly timed as to be useless. I’ve seen traders wasting their time on forecasts but reaction is more important than predictions.
I agree with you, a trader's predictions don't work all the time, he needs to implement his trades according to what's happening in the market.
Every trader has its own personal list of rules and they're considered to be unique, because all traders as well as all people in the world are unique libing beings. I have some rules which I try to comply with. The major one is to think twice before opening a position. It's a golden rule and I would definetely spend hours on analysis, rather than open random positions without any preparations. This rule helped me a lot in the past, when I analyzed one asset for tw hours and only then opened a profitable position. I guess this rule should be universal and all traders should try to comply with it. Another rule is to never regret of losses, because it takes plenty of nerves and destroys your mental health. Guess that you can try to comply with these ones.
I can tell you this rule is subjective. Reason being with a stop loss you are always selling at a loss. While this protects you from downside risk it also would make you prone to whipsaws.
Investors dont use stop losses and most of them are profitable.
Think how profitable they would be if they used didn't have losers in their portfolio.
What do you mean? If they used stop losses and it didn't hit it would be same result as an investor.
But if they didn't have a way to protect their capital and price moves down, then they have unrealized losses in their portfolio and their capital is tied up.
It's not so clear cut, I used to think like you but I have changed my thinking. There are some stocks that will go down and then go up again in the long run. So anytime it goes down it's Black Friday discount.
Let's say if you have Amazon, Tesla and Alibaba stocks. Do you really think all of them will go down to zero? How about cryptos like Bitcoin and Ethereum? Anytime it goes down it's a buy.
If you can take a snapshot at any give time, 90% of traders are losing money while inversely 90% of long term investors make money. Out of the 10% of traders that make money some make a little, some make the same as buy and hold, some make good profits and some make exceptional profits.
So basically only a few% makes like few hundred k/yr and even lesser are those exceptional or legendary traders who make millions a year.
That may be true if you have capital to invest.
I'm not saying any of them will go to zero. I'm saying that you can make efficient use of your capital by going to cash when a stock starts to trend down.
If you are an investor where do you get your cash to buy these bargains?
I'd like to see the data on those statistics.
It's not that you can't make money investing. Probably the majority would be better off with a buy and hold strategy of an index ETF.
I trade because I believe I can make superior returns over buy and hold. What I'm saying is that without a strategy to get you out of the market when it's falling you are at the mercy of the market to manage your portfolio. I'd rather be in control.
Buy and hold is no more than a trend following strategy with no risk control. We haven't had a depression in decades but then we haven't had a pandemic for decades. I can only control what I do.
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