So last week was another one which went by without a trade. The important thing here, is that there were some trades which I could have taken. As it turned out, I decided not to take them.
Most people enter into the markets thinking 'This is a great trade set up' and can only see the positive side to the trade with little thought about the potential downside. It is all very well setting stop losses and and position sizing accordingly... that is money management 101, but at the same time, we want to increase the probability that a trade will be successful.
Stop losses and position sizes only control the maximum we are willing to lose - and will not increase or decrease the chances are of winning the trade.
I go into trades thinking 'This is a terrible trade set up' and I try to convince myself that it is a good one.
Stop losses give you a maximum loss per trade - which is great, but minimising the amount of times you lose can be an even more powerful weapon in your arsenal.
If you go into every trade with your guard up - you can look at trades subjectively. I know we all want to have profitable trades, and we want to be in the market to make those profits, but certainly not at the expense of our account. Being subjective and having the mind set that you DO NOT want to trade is key to choosing the correct trades, and the high probability trades. You need to be convinced before you take the trades. The great thing is, is that over time you will be in many trades. Over the course of 5 - 10 years, you will have lots and lots of trades. And the key thing is that if you preserve your capital, you will make more and not lose it. It is far better to be in the game for 20 years with your core capital in tact, than out of the game seeing it sore 100, 200, 1000% percent, only to see it dissapear as quickly as you over trade on 'B' or 'C' trades.
The markets will always be there, but will you? Longevity equals success. That is the bottom line!
Onto the forecast of this weeks trading, the EURO should be settling down a bit after a bailout was agreed, although Italy's prime minister has quit (more uncertainty) and France are possibly next up to default. We are certainly not out of the woods yet, but cross fingers we come out of the other side in tact.
What this means for us, is that we should be getting better trades, and they shoudl be bankers in the next week or so. Here's hoping!
Happy trading!
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