WHOâS A WINNING TRADER?
"The central message is, âknowledge is not power. Education is not the key or the answer. In the end, the only thing that matters is what you can do under pressure. The strength of a great tree is the roots and the trunk, not the branches.ââ - Ryan Litchfield
Hello:
In one of my former articles, I revealed that the most difficult task in trading is the attempt to retain your accumulated profit when things arenât going your way. If the returns accrued in easy markets are extremely difficult to defend in bad markets (at least some part of the returns), then the most important trading skill is the ability to defend the returns on your portfolio. This also has to do with the ability to defend a trading portfolio. The point is to make sure that you lose as little as possible in bad markets, using very small sizes, stop loss, breakeven, trailing stop and take profit in your trading. During a losing streak, which would never announce its arrival, trading accounts and/or the returns on them can never be defended successfully with big position sizes.
Itâs your long-term survival in the markets that can make you a permanently opulent trader. Kenneth C. Griffin had a humble beginning as a market speculator. When managing relatively small amount of funds, he was successful, and as a result, bigger funds were entrusted to him. Griffin has been one of the most successful hedge funds managers of all time. What do you think is his average returns per month? Well, for those who invested, huge rewards followed which Griffin attributed to his exceptional investment skills. Specifically, annual performance has been in excess of 20% since 1998. Heâs already up by 15% this year.
To many traders out there, it isnât sensible to look for around 20% returns per annum. I understand the reason behind this feeling; most traders only have small amounts of money. For example, an annualized gain of 20% doesnât make sense on $1,000 unless it is $100,000. One former trader who was a consistently losing trader was complaining that his loss was due to the fact that heâd no enough money. Eventually, a bigger amount of money was given to him. He thought that would enable him to use bigger lot sizes. Things worked for him in the short run, but when a losing streak came in, he couldnât survive it. This means that if one canât manage small amounts of money successfully, itâs doubtful one would be able to manage big amounts of money successfully. The most important trading skill will forever be the ability to move ahead (no matter how slowly) no matter what the markets do.
Whoâs a Winning Trader?
Whoâs a winning trader? One who usually survives bad market conditions is a trader thatâs truly great. A winner knows that even with 10% - 30% returns per annum, she/he will soon grow rich. A winner isnât someone who doubles her/his account time and again. A winner is the person who can survive in the markets for the rest of her/his trading career â no matter how small the annual profit is. A winner doesnât fear loss for she/he knows that a loss would only take away a very small portion of their account (something negligible). A winner knows that after a loss, she/he will still be breathing, and therefore she/he has nothing to be afraid of. A winner doesnât dread taking trades from new setups because of a recent string of losses.
If you gain between 30% to 50%, or more than that per annum, youâre a victor. If you gain 20% or 15% returns per annum, youâre a victor. If you gain 10% or 5% or 2% in a year, youâre a victor. Youâd just need to be thankful for the fact that your capital is intact (those who have had big drawdowns on their capital are worse off). Youâre still a winner even if all you have at the end of a trading year is your capital; as long as your annualized loss is less than -10% (those who have had margin calls are far worse off). You donât need to lose what you have before you can appreciate it. As a risk manager, when in a losing streak, the more frustrated you are, the calmer you got to be (knowing that a winning streak is around the corner). A good year is ahead.
Please, leave any trading misconceptions behind.
Permanent victory in the market may be hard to achieve, but itâs not impossible. Despite the fact that some academics and economic theorists espoused the line that itâs impossible to profit on the long term, many people active in the markets â traders, investors, and some analysts â have known for years that markets arenât efficient and that theyâre affected by peopleâs behavioral and emotional biases and attributes. Small position sizes enable you to continue staying in the markets, for your portfolio would be your reinforcements when the market conditions are favorable to you. It pays to continue to stay active in the markets, for the best trading months and years may still be ahead of us.
I conclude this article with quotes from Ryan Litchfield:
1. âA good trader is ambidextrous. Upside and downside moves are seen as equal opportunity. A good trader appears fickle and almost too willing and eager to leave trade that is not going as planned. A good trader never loses. A good trader sees the small amount of money associated with being stopped out as a cost not a loss. The good trader sees that cost as the price to find out if a potentially big move would happen.â
2. âOk, so if you can't dictate the outcome, then your odds are 50/50 every day that you are in the market. 50/50 you say??? Yes 50 / 50. Time and time again the market moves the opposite way that was expected. News stories can reverse the direction of a stock or market and the market often reacts the opposite way the news might suggest. Trading must involve a comprehensive plan for a move in any direction.â
3. âContrary to popular wisdom, being successful in the market has little or nothing to do with winning. In fact trading, which is often compared to warfare and battle, is not about winning and losing at all. If it rains on your picnic did you lose? Hey it looked like a nice day. Was it your fault that a sudden storm showed up and your picnic was washed out? Since you can have nothing to do with the direction of a stock or the market, how can you win or lose? The market is going to do what it is going to do whether you play or not, all you can do is to act and react so as not to get run over. If you have taken a position and it moves against you, it is not your fault unless you did not anticipate that possibility and have an exit strategy in place.â
NB: Please watch out for my coming articles with these titles: âMaking Money out of Losses â A Blessing in Disguise,â âAchieve a Better Hit Rate with Gap Trading (Using the Logic Yourself),â âPlay the Markets Victoriously with Nano-cent Accounts,â âWhy Itâs Difficult to Do the Right Things in the Markets,â âHow to Identify a Sideways Market â Be Safe!â âA Negative Expectancy System â Pushing Against the Wind?â âTrading Signals,â âAn Intraday Moves Catcher â A Wealth Generating System,â âUnlock the Power of Everlasting Triumph in the Markets (Parts 1 - 12),â âHow to Handle Uncertainties in the Markets,â âThe Issue of Stops (Come Back! Oh Come Back!),â âA Hedge Funds Strategy,â âMy Hedge Funds Strategy Update,â âExperiment with Different Exit Tactics,â âMastering the Market Equilibrium Zones â A Time-sensitive Method,â âHow I Apply Risk Management â Part 3,â âA Simple Positive Expectancy System â Trading Effortlessly,â âTestimonies from My Subscribers,â âResist the Lure of High Risk â Part 4â âWorst-case Scenarios â Facts Are Sacred,â âEffective Swing Trading in Forex,â âGap Trading Revisited,â â3 Recent Gap Trades,â âDeveloping the Right Attitude towards Losses - Part 4 (Losses Arenât Abnormal),â âThe True Holy Grail â The Long Sought for,â âForex Trading Vocabulary,â â Clarifying Some Issues â Part 6,â âNavigating Turbulent Markets â A Double Timeframe Analysis,â âBefore You Open that Trade,â âCogent Trading Biases,â âOverview of My Signals Strategies - Can You Become a Super Trader?,â âOptimization of the USDCAD Hedging Strategy - Bringing the USDCAD to Subjection,â âUncertainty Has Become My Ally â An Interview with a Dogged Market Speculator,â âThe Cost of Discipline,â â2 Examples of the USDCAD Hedging Trades,â âMonthly Market Review,â âYou Are a Blessing to the World of Trading,â âAnnual Trading Results (2011) â I Was Perfecting My Trading Skill,â â2012 â Another Year of Victory in the Markets,â âMonthly Trading Report (December 2011),â etc.
Your questions and opinions are highly welcome.
Thank you.
With best regards,
"The central message is, âknowledge is not power. Education is not the key or the answer. In the end, the only thing that matters is what you can do under pressure. The strength of a great tree is the roots and the trunk, not the branches.ââ - Ryan Litchfield
Hello:
In one of my former articles, I revealed that the most difficult task in trading is the attempt to retain your accumulated profit when things arenât going your way. If the returns accrued in easy markets are extremely difficult to defend in bad markets (at least some part of the returns), then the most important trading skill is the ability to defend the returns on your portfolio. This also has to do with the ability to defend a trading portfolio. The point is to make sure that you lose as little as possible in bad markets, using very small sizes, stop loss, breakeven, trailing stop and take profit in your trading. During a losing streak, which would never announce its arrival, trading accounts and/or the returns on them can never be defended successfully with big position sizes.
Itâs your long-term survival in the markets that can make you a permanently opulent trader. Kenneth C. Griffin had a humble beginning as a market speculator. When managing relatively small amount of funds, he was successful, and as a result, bigger funds were entrusted to him. Griffin has been one of the most successful hedge funds managers of all time. What do you think is his average returns per month? Well, for those who invested, huge rewards followed which Griffin attributed to his exceptional investment skills. Specifically, annual performance has been in excess of 20% since 1998. Heâs already up by 15% this year.
To many traders out there, it isnât sensible to look for around 20% returns per annum. I understand the reason behind this feeling; most traders only have small amounts of money. For example, an annualized gain of 20% doesnât make sense on $1,000 unless it is $100,000. One former trader who was a consistently losing trader was complaining that his loss was due to the fact that heâd no enough money. Eventually, a bigger amount of money was given to him. He thought that would enable him to use bigger lot sizes. Things worked for him in the short run, but when a losing streak came in, he couldnât survive it. This means that if one canât manage small amounts of money successfully, itâs doubtful one would be able to manage big amounts of money successfully. The most important trading skill will forever be the ability to move ahead (no matter how slowly) no matter what the markets do.
Whoâs a Winning Trader?
Whoâs a winning trader? One who usually survives bad market conditions is a trader thatâs truly great. A winner knows that even with 10% - 30% returns per annum, she/he will soon grow rich. A winner isnât someone who doubles her/his account time and again. A winner is the person who can survive in the markets for the rest of her/his trading career â no matter how small the annual profit is. A winner doesnât fear loss for she/he knows that a loss would only take away a very small portion of their account (something negligible). A winner knows that after a loss, she/he will still be breathing, and therefore she/he has nothing to be afraid of. A winner doesnât dread taking trades from new setups because of a recent string of losses.
If you gain between 30% to 50%, or more than that per annum, youâre a victor. If you gain 20% or 15% returns per annum, youâre a victor. If you gain 10% or 5% or 2% in a year, youâre a victor. Youâd just need to be thankful for the fact that your capital is intact (those who have had big drawdowns on their capital are worse off). Youâre still a winner even if all you have at the end of a trading year is your capital; as long as your annualized loss is less than -10% (those who have had margin calls are far worse off). You donât need to lose what you have before you can appreciate it. As a risk manager, when in a losing streak, the more frustrated you are, the calmer you got to be (knowing that a winning streak is around the corner). A good year is ahead.
Please, leave any trading misconceptions behind.
Permanent victory in the market may be hard to achieve, but itâs not impossible. Despite the fact that some academics and economic theorists espoused the line that itâs impossible to profit on the long term, many people active in the markets â traders, investors, and some analysts â have known for years that markets arenât efficient and that theyâre affected by peopleâs behavioral and emotional biases and attributes. Small position sizes enable you to continue staying in the markets, for your portfolio would be your reinforcements when the market conditions are favorable to you. It pays to continue to stay active in the markets, for the best trading months and years may still be ahead of us.
I conclude this article with quotes from Ryan Litchfield:
1. âA good trader is ambidextrous. Upside and downside moves are seen as equal opportunity. A good trader appears fickle and almost too willing and eager to leave trade that is not going as planned. A good trader never loses. A good trader sees the small amount of money associated with being stopped out as a cost not a loss. The good trader sees that cost as the price to find out if a potentially big move would happen.â
2. âOk, so if you can't dictate the outcome, then your odds are 50/50 every day that you are in the market. 50/50 you say??? Yes 50 / 50. Time and time again the market moves the opposite way that was expected. News stories can reverse the direction of a stock or market and the market often reacts the opposite way the news might suggest. Trading must involve a comprehensive plan for a move in any direction.â
3. âContrary to popular wisdom, being successful in the market has little or nothing to do with winning. In fact trading, which is often compared to warfare and battle, is not about winning and losing at all. If it rains on your picnic did you lose? Hey it looked like a nice day. Was it your fault that a sudden storm showed up and your picnic was washed out? Since you can have nothing to do with the direction of a stock or the market, how can you win or lose? The market is going to do what it is going to do whether you play or not, all you can do is to act and react so as not to get run over. If you have taken a position and it moves against you, it is not your fault unless you did not anticipate that possibility and have an exit strategy in place.â
NB: Please watch out for my coming articles with these titles: âMaking Money out of Losses â A Blessing in Disguise,â âAchieve a Better Hit Rate with Gap Trading (Using the Logic Yourself),â âPlay the Markets Victoriously with Nano-cent Accounts,â âWhy Itâs Difficult to Do the Right Things in the Markets,â âHow to Identify a Sideways Market â Be Safe!â âA Negative Expectancy System â Pushing Against the Wind?â âTrading Signals,â âAn Intraday Moves Catcher â A Wealth Generating System,â âUnlock the Power of Everlasting Triumph in the Markets (Parts 1 - 12),â âHow to Handle Uncertainties in the Markets,â âThe Issue of Stops (Come Back! Oh Come Back!),â âA Hedge Funds Strategy,â âMy Hedge Funds Strategy Update,â âExperiment with Different Exit Tactics,â âMastering the Market Equilibrium Zones â A Time-sensitive Method,â âHow I Apply Risk Management â Part 3,â âA Simple Positive Expectancy System â Trading Effortlessly,â âTestimonies from My Subscribers,â âResist the Lure of High Risk â Part 4â âWorst-case Scenarios â Facts Are Sacred,â âEffective Swing Trading in Forex,â âGap Trading Revisited,â â3 Recent Gap Trades,â âDeveloping the Right Attitude towards Losses - Part 4 (Losses Arenât Abnormal),â âThe True Holy Grail â The Long Sought for,â âForex Trading Vocabulary,â â Clarifying Some Issues â Part 6,â âNavigating Turbulent Markets â A Double Timeframe Analysis,â âBefore You Open that Trade,â âCogent Trading Biases,â âOverview of My Signals Strategies - Can You Become a Super Trader?,â âOptimization of the USDCAD Hedging Strategy - Bringing the USDCAD to Subjection,â âUncertainty Has Become My Ally â An Interview with a Dogged Market Speculator,â âThe Cost of Discipline,â â2 Examples of the USDCAD Hedging Trades,â âMonthly Market Review,â âYou Are a Blessing to the World of Trading,â âAnnual Trading Results (2011) â I Was Perfecting My Trading Skill,â â2012 â Another Year of Victory in the Markets,â âMonthly Trading Report (December 2011),â etc.
Your questions and opinions are highly welcome.
Thank you.
With best regards,
