A few trading insights based on my experience
Markets Forex

1 Like 0 Dislike 2 Replies
1 year ago

Trading has taught me many important lessons (including some particularly tough ones). Based on my experience, I believe that the following points will be helpful for any trader.

1. Patience is a virtue – and a vice.

You may have opened a good position but the market may move in the opposite direction for a short duration. Do not panic and do not start closing your position in a hurry. Think and plan for every eventuality before opening your position and accordingly, keep an appropriate stop-loss. After that, do not worry if the market goes against you for some time – your stop-loss will take care of this.

At the same time, if the market goes against you, do not start extending your stop-loss. Some people tend to optimistically believe that eventually the market will turn and will validate their position (thus, giving them profits). In this hope, they extend their stop-loss so that their position does not get closed. But this can lead to massive losses. After all, there is no guarantee that the markets will correct soon.

2. Extend your winning positions – but with caution.

This is an important point. If your picks are in profit, the profits will only materialize once you close your position and get your money. Otherwise, at some point, the markets may turn and move sharply, thereby putting you in the red.

So, if one of your trades is in positive territory, let it remain open so that you may benefit from any further favourable movement. At the same time, change your stop-loss and bring it closer to the current price. This will ensure that if the market changes direction, then you do not incur such heavy losses that all of your profits get wiped out.

3. Last, but not the least – never underestimate the role of luck.

When we make a winning trade, we believe that we succeeded due to our intelligence, knowledge, adroitness, etc. When we lose on some trade, we typically blame it on an irrational market, poor timing, bad luck, etc. The problem with this way of thinking is that it may lead to overconfidence and cause large losses.

Markets can often be irrational – nobody knows when the markets will move in the right direction (in fact, nobody knows what the right direction is). That uncertainty is a fact of life. The objective of all trading is to try to get some profits from that sea of uncertainty. In the pursuit of this objective, every trader loses at least some of the time. Nobody has 100% accuracy – or anything close to it. So, do not forget the basics ever. Never think that you have become an expert and do not need to follow basic risk management (loss prevention) strategies. Always study the market very, very carefully before opening a position and always work to ensure that if you lose, your losses remain small.

These are some points that have helped me a lot over the years. Hopefully, they can be of some help to you as well.

Posted 1 year ago 2 Likes   0 Dislikes

Thanks for your guidance, Liam. It is this kind of insight from veterans that is really helpful for relative beginners. And, of course, such insights are not available in books or manuals easily. Your post is very valuable therefore. :) 

Posted 1 year ago 0 Likes   0 Dislikes

Wow, that's really sensible advice, Liam. Thanks for sharing your thoughts. It's always useful to learn from the experiences of others.