June 3, 2019

Why only a few are successful in trading?

.......What the market will do next or what a stock will do next (next being after you have bought it/ or in some cases sold if going short) has no bearing on being a successful trader.

Shocked?! (If I buy and stock goes down, I am into a loss and how is it that it doesn’t matter?)

Trading is essentially taking a probabilistic bet. Whatever be your basis of arriving at the probability, the probability can never be 1 or 0. It falls between this range and that is the risk a trader takes. If his view is correct, he makes money else he loses money. What a good trader doesn’t do is argue with the market – if he is proven wrong, he takes the loss.

Thinking about trading this way takes away the whole pressure to be right about the bet all the time. While taking the bet (or the trade) itself, you know that there is a probability that you could be wrong and if that happens it is not disturbing. What kills most of the traders is the expectation and pressure to be right ALL THE TIME – which leads to fatalities ranging from hoping that it works, going crazy on risk management to losing it mentally etc. (On a side note, twitter is full of people with views on stocks and markets but no skin in the game. If they were to put money behind their views, we may only have one-tenth the traffic on Fintwit.)

Just having the background that the stock or the market can do anything after you have bought – makes it much easier to not let ego or emotion get attached to the trade.

Read more at https://altaisadvisors.com/why-only-a-few-are-successful-in-trading

No comments:

Post a Comment