"Professionals treat gambling as a job. They keep calculating odds and act only when mathematics point in their favor. Losers, on the other hand, itch for the action and enter one game after another, switching between half-baked systems." — Alexander Elder On the other hand, there are these fools who have no system at all. They're the ones who have their heads up their (you know where) and delude themselves it is only a paper loss. The Fallacy of Paper Losses The familiar term, "paper loss", is most popular among long-term investors. It is frequently used to justify keeping a bad investment because closing it would convert the paper loss into a real loss. Roughly translated, it means: “I made a bad investment decision and lost a ton of money, but I am still confident that over time my decision will prove to be correct.” Unfortunately, paper losses are real losses, and they are reflected in the account balance. More importantly, holding onto a losing investment with the hope that it will turn around is unproductive because that money could provide more value had it been invested elsewhere. Moreover, there's no assurance of knowing that the loss will ever be recovered in its original investment. Needless to say, money should always be deployed in an optimized way by selecting the most promising investments at any given moment. Hanging onto a losing position to avoid booking the loss makes no real sense, and it is often a very costly mistake. It, therefore, makes perfect sense to realize losses and move on, unless there are simply no better investments. Unfortunately, most investors also fool themselves into believing that they have already made the best trades. (Simply put, bad practice produces bad habit. Not only is this detrimental to your account in the long run, it fosters a sense of false hope. Maybe you got away this time, but you might not get away next time.)
Ya know the types that say I'm up x number of dollars today so its ok if I put another (iffy!!) trade on and give it back. Even is still ok. eff that. Money booked is money booked.
A bear chased two hikers. One hiker, while being chased, suddenly stopped to put on running shoes. As he was changing out of his hiking boots, his companion looked at him in horror and exclaimed, “What the hell are you doing? You’ll never outrun the bear if you stop now!” Calmly, the other hiker said, “I don’t have to outrun the bear. I just have to outrun you.” Here, a bear is the institution. You and your friend are the retail traders. Whether you like it or not, it's impossible to outrun the bear. Hence, your job is not to outwit the institution but simply dupe your fellow retailers, and preferably those who are dumber than you.
Why Lines Zones Matter Traders often forget that support and resistance are zones and not just lines. Many traders draw horizontal lines to represent support and resistance and fall into the mistake of thinking that these lines accurately represent levels. The fact is that support and resistance is created by traders and traders exist on multiple time frames. Traders on different time frames will place their orders at varying distances. Thus, you will rarely see a perfectly horizontal level. Instead, a cluster is more likely and this is what gives rise to zones. Traders operating on higher time frames will place their orders in the shallow portion of the zone while those operating in lower time frames will place them deep in the zone. For example, if you’re trading the hourly and you see that an upcoming level exists on the daily and the weekly, odds are good that price is going to react strongly at this level.
%% I like the way Larry 'Mint' Hite disclosed in his book, he was '' blind in one eye + half blind in the other eye''. Some one that went to to school with Larry , exclaimed ''Larry Hite runs a hedge fund?? He was the one that ran into walls '' LOL Helpful read.
Controlling your ego is a valuable asset for a seasoned trader. You don't bet bigger when you are losing, you bet bigger when you are winning. If you watched the movie Floored, documentary about how pit-trading lost to the computer (see below), you can learn something from one of the featured traders, Greg Reba. Greg said something in the movie that in all actuality is a hidden trading gem when you put aside any of your initial thoughts when listening to Greg; he didn't come across as the most credible source. He simply talked about betting bigger when you are trading well. Finding the Edge Most people have it backward and trade conservatively to protect their lead when they are up and trade bigger when they are down to get it back. This logic doesn't make any sense (and cents for that matter) when you think about it. In sports when a player is playing badly, they get benched so they don't take the whole team down. This is hard to do when the emotions of loss are flaring in your head. You just have to learn when to floor it and when to put on the brakes. The feeling in your gut will always give you a foreshadowing sign and if you haven't felt it yet you will at some point.
For our noob brethren (as well as some of our resident old farts) who are getting their toes wet. The Six Majors of Forex These are the most liquid and widely traded currencies in the world. Trades involving majors make up about 90% of total Forex trading. They are USD/JPY, EUR/USD, USD/CHF, AUD/USD, USD/CAN, and GBP/USD. Understanding Currency Values The following example shows how fluctuations affect currency prices: USD/JPY 110.08 means that 1 U.S. dollar equals 110.08 Japanese yen. If the price moves to USD/JPY 111.08, it means that the dollar has gotten stronger, as one could buy more yen per dollar. Conversely, if the price moves to USD/JPY 109.08, the dollar has gotten weaker, as it buys fewer yen per dollar. Prices for the JPY are given to two decimal places, but prices for all other currencies are given to four decimal places. The spread is expressed in units called ticks, points, or pips (an acronym for “price interest point”). A pip is the smallest unit a currency is traded in. It is represented by the last number on the right side of the price. For example, the Japanese yen is calculated to 2 percentage points. A bid/ask quote for the Japanese yen against the U.S. dollar might look like 109.23/28. In this case, the smallest unit is 0.01, which equals one pip. Therefore, the difference between the two figures—0.05—is expressed as five pips. The euro and the pound are both calculated to four decimal points. One pip therefore equals 0.0001 of the currency. If the Japanese yen climbs from 105.05 to 105.08 against the U.S. dollar, for example, it has gained three pips. If the euro jumps from 1.0032 to 1.0072, it has gained 40 pips. To calculate how much each pip is actually worth, divide the currency’s smallest tradeable unit by the currency exchange rate. Let’s take the EUR/USD as an example. The euro’s smallest tradeable unit is 0.0001, and the currency exchange rate with the U.S. dollar is 0.88. To determine each pip’s value, calculate 0.0001/0.88, which equals 0.000113. Lot Sizes A standard currency contract is referred to as a lot. Initially, lot sizes were very large because currencies were traded only by large financial institutions. With the advent of retail trading, the forex market came up with smaller units called mini lots and micro lots (and even nano lots, which aren't as of yet offered by that many brokers).