Losses For The Sake Of Victory Part 1
The most difficult, but also the most important lesson it is necessary for everybody to learn in trading is how to get through losses. The majority of traders inevitably at some instant faces a train of losses, therefore those who hasn’t learned to lose, without being thrown out of game, can’t survive in the market. Traders who have realistic expectations of prizes to losses and system of trade to which they trust, have the best chances of a survival in rigid market atmosphere. Here we will consider what losses can wait for the trader and as it can arrange strategy of work with these losses.
The lost battles …
Each trader knows that to trade against a trend is not too good idea. Therefore it seems logical that the best systems of trade will be the one that follow a trend: when the trend grows, we open only long transactions and when decreases – has come to sell time. Then it is possible to think, what systems following a trend will have the best relations a prize/loss, truly?
In the new book, “the Short course on Technical Trade”, Perr Kaufman gives some statistics on this question. According to this veteran of trading, “you can expect that 6 or 7 from 10 transactions on a trend will appear unprofitable, some of them will be small, some – a bit bigger”. And still, Kaufman says that following a trend – among the best systems of trade from all. In other words, systems following a trend won’t give huge profit, but will for a longer time bring success, than the majority of systems.
It, possibly, becomes shock for those who have conducted uncountable set of hours in search of advantageous system, but Kaufman absolutely accurately shows in the book what to have realistic expectations of prizes to losses means to expect losses – generally. He declares: “As the trader of a trend, you should expect, mainly, the transaction with small losses; it is a little transaction with small profit and some big prizes”.
Only for it “the Short course is worthy addition of your library. Kaufman gives the examples showing to that traders if they want to receive profits should learn:
If trading was casual (normal distribution) as a turn of throws of a coin for 1000 transaction days – or approximately for four years – the trader can expect to receive 10 victories (or losses) successively only once. However, trading isn’t casual.
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