While continuing to read the Market Wizards book in order to help with the new system i'm trying out, I read a story about a great trader who's entire mindset was to control risk. Although he did not take as many trades as he could have (in which he said he missed out on a lot of money) he did not enter many losing trades and if he was in a losing trade he would exit it asap. Over trading has been one of my main problems. Instead of waiting for the "perfect" opportunity I used to want to enter everything that looked moderately good. This is one of the quotes from the book that I think we can all relate to.
"One of the basic problems that most traders face is dealing with risk... two primary rules to successful speculative trading are: Cut your losses short and let your profits run. Most people cannot deal with those two rules...If making money is important to you - as it is to most people who play investment games- then you will probably have trouble taking small losses. As a result, small losses turn into moderate losses, which you are forced to take - all because it was hard to take a small loss. Similarly, when people have a profit, they want to take it right away. They think, I'd better take this now before it gets away... most people are risk adverse...they prefer a sure, small gain to a wise gamble for a larger gain... in the realm of losses- they prefer an unwise gamble to a sure loss. As a result, most people tend to do the opposite of what is required for success. they cut their profits short and let their losses run." (Dr. Van K. Tharp)
I'm a little bit late on this update because it is currently a busy trading day for me. I'm in 4 right now. So we'll see how they turn out and hopefully you'll read about some good news tomorrow.
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