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Trading is about knowing where the market is going.


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Just sharing the fundamentals. There are only 3 ways the market can go. Up, down or sideways. In other words, if we bet on 1 way. There is only 1/3 probability we can make money. 

Can we have 2/3 probability of winning? It is possible, if we hold a sideway position long enough for it to move up.

But is it possible to have 3/3 or 100% win? Hmm... it is not possible. Yet it seems, we have many (novice) people who trade and hope to win all the time. 

So, why is it most traders lose money in the market? Winning traders form around 10% of the market participants.  

If you can't win at trading, find out why. As a famous saying goes. Tell me where I die and I make sure I don't go there. It is normal to make losses in trading, just make sure the losses are not too big. Learn from it and make better trading decisions next time.

 

 

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4 hours ago, igungho said:

It is normal to make losses in trading, just make sure the losses are not too big.

That's the sentence. You don't really care about where the market is going, you are fine as long as you can handle your exits. 

If you focus on 'when to enter' your system will be wrong most of the time, but if you focus on how to handle drawdowns you might get it right.

That's why TA books are only useful as door stoppers or monitor lifters. 

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Hi @igungho

Thanks for sharing.

6 hours ago, igungho said:

There are only 3 ways the market can go. Up, down or sideways.

At any given time markets are either ranging or trending. When a currency pair or stock is trending it is making higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend. When a currency pair or stock is ranging, however, price action moves between a relatively defined level of support and resistance for an extended period of time.

6 hours ago, igungho said:

It is normal to make losses in trading, just make sure the losses are not too big. 

Get comfortable with the fact that losing is part of trading, set stop-losses and limits to define your risk ahead of time, and aim to achieve proper risk/reward ratios when planning out trades.

6 hours ago, igungho said:

Learn from it and make better trading decisions next time.

To practice solid risk management, traders should:

Work out their attitude to risk, thinking about risk/reward ratio, position size, and percentage of account balance for each trade.

Place stop losses to protect against the market going against their position.

Be wary of leverage and using too much.

Keep a handle on emotions.

Use a journal to make decisions based on existing data rather than personal feelings.

 

Have a look at this blog very interesting:

 

All the best - MongiIG

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1 hour ago, jlz said:

but if you focus on how to handle drawdowns you might get it right.

Hi @jlz

Thanks for sharing.

Below are six risk management techniques that traders of all levels should consider:

Determine the risk/exposure upfront.

Optimal stop loss level.

Diversify your portfolio: the lower the correlation, the better the diversification.

Keep your risk consistent and manage your emotions.

Maintaining a positive risk to reward ratio.

 

All the best - MongiIG

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  • 2 weeks later...

Trading without a plan is a plan for failure. But what is a good trading plan? Do we trade based on technical analysis or maybe a blackbox that give us signals? Surely, there has to be a better way other than just blindly following someone recommended trade plan. One thing is certain, any good trading plan has to be consistent in performance. This means it has to have a stoploss and a target based on certain parameters even before we enter into a trade. 

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