Thursday, August 16, 2012

Fears in Trading

I received an email in which the trader expressed his problems in executing trades. He was overcome by fear just before he planned to trade.

Here is my reply, which I am sharing with readers.

Quote:

 I have received today, your email regarding difficulties in executing trades.

I wish to share some of my ideas with you.

1. Trading is never certain. We trade on probabilities. based on our charts and analysis, we feel that Bharti Airtel share price should come down. So, we take a trade on the short side.

Remember, we can never guarantee that price will fall. No chart pattern can give such an assurance.

What we are doing is this: we take a position based on our analysis. If it works out we make money. But, it may not work out. Then, we have to be prepared to lose money.

As Traders, our job is to earn Rs 100  and Lose - not more than Rs 80. then, we will make a net profit of Rs 20.

Understand this. Losses will come. They are part of trading.

So, why do we get worried when we want to trade?  Two reasons.

First, we do not like to take a loss. It hurts our ego.

Second, the loss may be more than our capital can afford.

The solutions are easy and simple.

First, accept that losses are inevitable. Enjoy the process of trading. If there is a loss, that is what the market wanted.

Second, manage your volumes. if the loss is worrying you becasue you feel you cannot afford it, then you are trading too large. Reduce your volumes immediately.

UnQuote

4 comments:

Yousuf said...

nice

indrajit said...

Sir i am a regular follower of this blog of your's and love your guidance.If you don't mind i have a problem which i face regularly. I am confuse about what are the different scanner for stock one use for different Market Trends
Looking forward for your reply

Jitender Yadav said...

Respected Sir,
I recall two quotes here that I think, are very relevant to the topic.
"Never Make a bet that you can't afford to lose."
and the other is
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” George Soros

Your Fan
Jitender Yadav

Dinesh said...

Dear Sir,
One of the reasons I like to read your blog, apart from getting trading tips, is that I admire your style. It is too simple to understand as you use a very simple language and without any jargon etc.
Regards,
Dinesh