Skip to main content

Risk Capital? At Least You Thought It Was

 It’s on the bottom of every piece of commodity trading literature, every commodity, Mutual funds  investment  advertisement, as demanded by the SEBI.. etc… 

WARNING:  Only risk capital should be used for this kind of trading. might as well be Area 51 when it comes to investors caring the warning! 

Over my trading career, I’ve talked to many traders just beginning their quests for riches and too many of them approach the market with “money they’ve saved up” for the purpose of speculation. 

That may be all well and good, but before you start on your journey of pain and joy, get one thing straight. 

You’re going to get emotional… just HOW emotional will be largely a function of whether your risk capital is “comfortably losable,” when you are faced with a step back on your road to profit. 

The more mental and emotional investment you have in not wanting to lose your stake, the more you are likely to lose it. 

OK.  You’ve got a trading system you like. 

You’ve back-tested it. 

You like. 

You do some “worst case” math. “Let’s see, with the stake I’m going in with, if I keep my losses to a maximum of X Rupee, then to lose my stake, I’d have to have 20 losers in a row.” 

“Never happen.” 

Seasoned traders are laughing to themselves reading this because they know that if you have to do this kind of math, then your chances of surviving and prospering are slim to none. 😅

It’s like the guy who counts his chips at the blackjack table… 

Those that are too concerned about every chip are usually playing scared. And you know what happens to scared money. 

 Yes, it flows into the pockets of the confident. And that is the point of this text exercise. 

If you don’t REALLY have an “If it’s gone it’s gone, and it won’t affect my lifestyle in the least” attitude, you are not creating the best chance to win. 

I’m not saying that you should take a flippant attitude toward losing or winning.  I’m saying that the more losing your money has emotional meaning the less chance you have of succeeding. 

 

Stock (Forex, Futures and options…) trading should ideally be part of a mix of diversified investments. 

Who am I kidding?! 

Most of the newbie traders I come across barely have their bills covered and are looking for a way to break out of the financial doldrums. 

All the gurus telling you your dream is possible for a stake of 10,000/- And maybe it is for the Few, the Proud and the Lucky. 

But not for most.  Why? 

Scared money. 

To win, your attention should be focused on the process of trading, not on each win and each loss. If you don’t treat trading like a business, and make sure it’s well funded, you’ll wind up the way of the clean account .

In the end, it’s all about attitude and you mental strength of conviction to follow your tested trading plan. 

If you’re under-capitalized, your conviction will waiver as fear creeps in. 

You’ll hesitate when your system gives you the green light and you’ll take your profit too early. Your light will dim and in the end, after blaming market conditions, your light will go out. 

Whether you’re going to “fake it till you make it”, or you have adequate capital to begin with, you better have your emotional wits about you. 

LATEST VIDEO: TYPES OF MOVING AVERAGES
NEXT BLOG : TRADING PSYCHOLOGY IS OVERRATED 
PLEASE COMMENT DOWN ANY TOPIC YOU WOULD LIKE ME TO PREPARE A BLOG ON 
Instagram : WiseMan Trading

Labels:

Comments

Post a Comment

Popular posts from this blog

Questions and Methods for Price Action Analysis

 Winners and Losers in the Market a. Who is dominating the current swing, bulls or bears? b. Are they correct? c. If they‟re wrong: i. Where is this move likely to stall? Where is the opposite order flow likely to enter the market? ii. Where will these traders have positioned their stops? d. If they‟re right: i. Where are these traders targeting? Where are they going to take profits or lighten their position? e. If they‟re in the right direction, but late: i. Where is the worst place to be entering late in this move? Where will the late traders be stopped out? Trapped Traders a. Where is the last group of trapped traders? b. Where are they hoping to get out? How will that affect price? c. Where will they give up and bail out? How will that affect price? Expectations - Most Likely Price Movement a. What do you expect the market to do from here? i. Why do you expect that? ii. How would price have to behave prior to that move occurring? iii. Is price behaving this way? b. If the most ...
Post a Comment
Read more

Understanding Gaps in the market and trading them !!

  Common Gaps Sometimes referred to as a trading gap or an area gap, the common gap is usually uneventful. In fact, they can be caused by a stock going ex-dividend when the trading volume is low. These gaps are common (get it?) and usually get filled fairly quickly. "Getting filled" means that the price action at a later time (few days to a few weeks) usually retraces at the least to the last day before the gap. This is also known as closing the gap. Here is a chart of two common gaps that have not been filled for while but now filled up . Notice that after the gap the prices have come down to at least the beginning of the gap? That is called closing or filling the gap. A common gap usually appears in a trading range or congestion area, and reinforces the apparent lack of interest in the stock at that time. Many times this is further exacerbated by low trading volume. Being aware of these types of gaps is good, but doubtful that they will produce a trading opportunities. Brea...
Post a Comment
Read more

THE 25 - POINT MANTRA DISCIPLINE FOR DAY TRADING

The Wheel of Success in Trading  There are three spokes that make up, what I call the Wheel of Success as it relates to trading.   The first spoke is content Content consists of all the external and internal market information that traders utilize to make their trading decisions. All traders must purchase value-added content that provides utility in making their trading decisions. The most important content being internal market information , which is simply time and price information as disseminated by the exchanges. As we are making our trading decisions in present time based on time and price, In order to "scalp" the markets effectively, we must have the most live up-to-date information . The second spoke is mechanics Mechanics is how you access the markets and the methodology that you employ to enter/exit your trades. You must master mechanics before you can enjoy any success as a trader. A simple keystroke error can result in a loss of thousands . A trader can ruin his e...
Post a Comment
Read more