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sábado, 3 de enero de 2015

The key to the three M to achieve success in trading

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A loser trader can get trapped in a downward spiral and play behaviors similar to those performed recursively by an active alcoholic.

Success in trading is based on the three MMind, Method, and MoneyThe method is the first thing in which all beginners focus, but the result of your career as a trader in the market depends on the mind and money. Intellectually, the game of trading is not picky; Many successful traders have little formal education. There are only five numbers to take into account - maximum and minimum, opening and closing, as well as volume. On the other hand, emotions that occur during trading make it the hardest game in the world. The main source of stress is the total freedom that involves trading. The trader must decide when to enter and when to exit, when to take profits and when to keep open a position to win more,  when it is appropriate to accept a loss and when to expect a market turn in our favor.

When Alexander Elder wrote Trading for a Living, included in the book an idea that his editor thought it was a scandal. Elder wrote that losses for traders were like drinking for alcoholics. The level of risk that is set before opening a trade is a normal part of the game, but anything above that number is a waste - it's like getting drunk. In the book Elder recommends using the approach of the 12 Steps of Alcoholics Anonymous (AA), which apparently did much good to many people. The editor at the time wanted to do away with this concept on the book, but changed his mind when Elder offered to return the advancement of the book and break the contract. Many readers have written to say that the concept helped a lot.

A loser trader caught in a downward spiral, repeat the same mistakes, skip important parts of the task, and use money management rules, continually trying to trade in any way to get out of the hole. The trader is acting in many ways as an active alcoholic who would like to become sober, but who can not get off the roller coaster.

Some traders flock to professional coaches, but the AA method is more effective than any "professional help". Personally I would recommend to a trader who has lost his way, talk to another trader on a regular basis. Put an external observer on the scene, which can help a stressed loser trader to establish a discipline and start connecting their blind spots. It's what I call a Listener.

A listener is not a coach. He is not there to teach how to trade. He is there to help the losing trader to avoid impulse trades and develop greater discipline and better capacity for planning. The loser trader will send the listener his trading plans, the diary with the trades, and copies of the account statements. The purpose of having a Listener is to make us aware of all the steps that we follow in the markets and stop trading nonsense as this is a sure way to gets us into trouble.

In their presentations Elder explained the steps to establish a relationship with a Listener. He considered that it has to be done for a limited period and include a number of parameters. The relationship has to be clear and transparent, without a hidden agenda.


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