Some beginning and intermediate traders have learned chart patterns, gained an understanding of trend, and can create trade setups based on a “reasonable” methodology. But success eludes them because they can’t “put it all together.” A core market principle, a strategy and tactics is only step one. Next is process and execution. You can have all the theory down, but you then need to put it into practice.
The founders of Precision Trading Labs had a common trading teacher & mentor. Something he said to us on various occasions has always stuck with us, and made us better traders: “Learn to love your losses.”
“WTF?!” you say? Here’s the 411:
His comment was a shorthand way of saying to have a solid risk management plan, and following it would make us better and calmer traders for it because we’ll know in advance that all of our losses will be small, manageable and already planned for:
A conversation between two of our traders about common mistakes beginner traders often make. Do any of these problems sound familiar to you?
Precision Trading Labs believes in always using use stops. Why? Because we always have a concrete reason to get into a trade. If that trade foundation is violated, then the reason for the trade is gone. At that point we've lost control of the trade and don't know what price will do. We're then left with hoping that price will reverse & start to go our way, meanwhile our loss grows and violates our trade plan. What leads to big losses is the inability to admit when we're wrong. Being able to accept taking a small loss is the start of becoming a trader & a sign of strength.
If there's something in the chart that might reverse a trade's course after it initially goes bad after your initial setup, then that should generally have been part of the plan to begin with. For you football fans, you want to avoid yelling "Omaha" and calling audibles like Peyton Manning used to do when you're trading.
Our attitude is "HOPE IS NOT A TACTIC." Some people say fixed stops are for suckers. We respectfully submit traders who trade without a net are looking to hope when things go awry and can't admit when they're wrong. That's the the enemy of trading for a living. YMMV. Safe trading.
Many people aspire to trade, but take very different paths to get there. Some seek out a roadmap to get put on a directed path to speed and enhance their progress; others decide to go it alone and grab information from numerous sources.
Trading takes smarts, work, finding a lens to view the market and learning basic trading principles. Next is determining what to trade and a specific style. Then identifying or creating one or more trading strategies, and adopting tactics to implement the strategies.
Next is paper-trading to gain comfort with tactics, process and execution, then low position-size, real-money trading. Once you achieve a certain level of competency you can then start to create trading goals connected with personal financial objectives. Paramount throughout is risk management, proper position-sizing and emotional discipline.
Like the markets, a trader’s progression doesn't follow a straight line and it’s not without hiccups. There are light-bulb moments, setbacks and periods of despair. Virtually every trader, both those who are successful and those who aren’t, go through everything above.
But while the general things aspiring traders experience are similar, the specifics widely differ based on how they approach their education. Variables include:
As an aspiring or novice trader you should take a serious look at your development path…Make sure you’re wisely spending your tuition.
Precision Trading Labs HQ
144 E 44th Street, Suite 520
New York, NY 10017
(between Lexington & 3rd Ave)