Your New Trading System – what not to do!
Trading is a difficult game and most people find it difficult to take a loss of any sort. The problem with trading is that losses are inevitable in trade. Does the below sound like you? (I took it from a newsletter I receive but thought it was a great article!)
So you’ve invested in the new trading system and you’re raring to go…
The post arrives and you rip open the package.
You digest the contents of the guide with your coffee, boot up your laptop and you’re ready for action.
You set up your trading account, deposit some cash, open your charts and then follow the instructions for the trading signal.
And your trades may go something like this:
1st Trade Signal – you place your trade following the rules, and it’s stopped out for a loss.
You’re disappointed, but still positive. You’ve only lost 2% of your account balance, you stuck to the rules.
2nd Trade Signal – you see the trade signal and place the trade, it hits the profit target.
You feel great, you followed the rules, you’re more confident in the new system and in yourself as a trader.
And your account is 1% in profit already.
3rd Trade Signal – you see another trade signal and take the trade.
It’s another winner, you’re over the moon.
You’re now 4% in profit.
And you feel like you’ve finally cracked it.
You’ve found something that really works.
You’re on your way to untold riches, you start planning your resignation letter.
4th Trade Signal – another trade signal and you take it.
But this time you’re so confident you decide to double your stake.
And it’s a losing trade.
You’re back to square one, your accounts at break even.
5th Trade Signal – you take the trade and stay with the double stake level.
You’ve guessed it, it’s another loser and now you’re down 4% of your account balance.
It’s starting to get to you now. It must be a bogus system after all.
6th Trade signal – you take the trade, it’s another loser, your account is now down 8%.
You feel like you want to cry, you’re now sure you’ve been ripped off.
7th Trade Signal – you don’t take it, you lack confidence in the system.
It’s a winner but you missed out, your account is still down 8%.
You’re now totally frustrated with trading.
It was supposed to be easy money.
8th Trade – one last chance to get your losses back.
The trading system doesn’t give you a signal.
But you want your money back so bad that you take a trade anyway.
It’s stopped out, and you lose another 4% of your account.
Your account is now down 12% overall.
You’ve now lost confidence in your ability to follow the system.
And you’ve lost confidence in the system as well.
You quit and apply for a refund; the system clearly was not all it was cracked up to be.
But there’s an obvious problem.
Had you just followed the trading rules, your account would have had a small profit of 2%.
Even with the losing streak of trades.
But a small profit is still a profit.
But if this trading log sounds familiar, don’t despair: we’ve all done this at some point.
But just remember when you try the next trading system, take things slowly.
Enjoy the fact that you’re learning something new.
And make your goal to follow the simple trading rules next time.
Plus your confidence in your trading ability should increase.
And you may find a trading system that works for you after all.
