A win, is not always a win

EQUITY RUN UPDATE:  $15,375 //  + 53.75% since inception (Apr. 2017).


 

If you want sports at all, among the many cliches that coaches express on a daily basis are the following:  “it’s a win and we’ll take it,” “it wasn’t pretty, but a win is a win,” “it’s tough to get wins in this league.  We’ll take that ‘W.'”   Typically this is said after a team played terribly, but somehow got lucky to win the game.

In trading, especially for beginners, a winning trade done without principles and without   a replicable logic can be the worse thing it can happen to a trader.  You see, winning/making money is like a drug that reinforces the behavior that led to that result.  If that behavior is wrong (i.e., not replicable on a regular basis, without a clear logic, not based on historical facts, etc.), it is more likely to fail in the future and the win was just a lucky shot.  While being lucky is certainly a good strategy to play the lottery, it is not ideal for trading.  In fact, it’s dumb.   I’ve seen it in myself and other traders.  Just because one trade worked out well one time, it has no reason to work out well again in the future.

The trades that are more likely to work well in the future are the ones that have stood the test of time.  That test isn’t just the time you put in, but also the lessons and principles that many other traders have set before us.  It behooves a novice trader to spend time watching, reading, and learning the history, the styles, and the methods of other traders.  Alongside that study, spending time learning about the specific markets is also very important, because each has its own “character” that needs to be learned.

Those who neglect the lessons of history… are doomed to fail.  If you think you are pretty smart because your first couple of trades worked out well, you are either the 0.01% misunderstood genius of your generation or you are too smart for your own good and you will fail.

I recommend that a beginner trader start first by paper trading (trade a simulated account) and then use the smallest amount possible, say around $30-50,000 to practice and learn. Over time, this strategy will pay dividends and spare you a lot of heartaches.

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