Floor reflections on trading

Formula Risk / Reward is objective in its relation to the market and created in order to keep you in the game regardless of the outcome on as long as possible. That's why traders shun such formulas. Most traders eventually lose all their capital in and out of the game. Formula directly related to the preservation of capital and guarantee its increase, but most traders operate under completely different ideas and stimuli, where the risk is often dominant. Unsuccessful traders are not always ignorant and know-nothings. Quite the contrary. Just such traders often do something completely opposite of what they should be doing. If they do the opposite, they would be in profit. In other words, to achieve these negative effects, you just do the right thing - but the other way around!

Ralph Lockhart (Ralph Lockhard), my teacher, gives the example of his wife when she was a schoolgirl. She was an excellent student, but hated the tests. And once decided to answer all the questions correctly. It was a test with four answer choices.

If she had just picked answers, eyes closed, she scored a 25%. But she repeatedly gained 0%. In the end, the teacher realized that she was doing. After all, you just can not get 0% if you do not know the correct answers to 100%!

It's the same with traders. They have strategies and techniques, market knowledge and technical analysis, the formula for calculating risk-management stop orders. But the real dynamics of trading successfully overcomes all these designs and selects money trader as long as he does not allow the main problem, which can not be solved by known methods. This problem consists in the fact that between the market and there is a layer of methods - the trader.

We now turn to specific issues. Novice traders often ask, "How much money is needed to trade? '. This is a common question of choosing the starting, or trade, capital. The answer would be: "You will need much more than you think." If you read books on trading, you'll probably come across examples of systems in which the $ 10.00 or $ 10,000 in seed capital turned into $ 5 million. If you follow the advice of the author, it will - during the ... 20. Psychological meaning of these examples is to convince you of how little you need to have to achieve so much. So many people come to the Trading with the idea that there is a small start-up capital can bring a lot of money. But the real figures paint a very different picture.

As for the trading and the associated risks, here we must answer the following questions.

1. What is the magnitude of risk of instrument you are going to trade? What is more risky to trade oil futures or stocks AMZN? Do you remember that each market has its own certain amount of risk, based on the historical volatility?

2. What is the profitability (profit ratio) method you use?

3. What loyalty you use methods? What is the percentage of winning trades?

4. What is the profitability differential between your system and the system of random selection?