tempted to ask two simple questions:
1. Was the loss of money worth all the emotional pain and financial
heartache?
2. If you had the opportunity to do that trade or investment again, what
would you do differently?
So tell me your tale of loss:
1. What is the biggest loss you have personally taken in the market?
2. If you have never traded in the market, what is the biggest loss you
have taken as an investor or in business?
3. What was your emotional experience during this event?
4. What went through your head and your heart during that event?
5. Were you in emotional control or was your destructive ego in control?
6. Was it worth it?
7. What did you learn from this experience? If nothing, then I am sad
to inform you that you will probably repeat it in the future.
8. What new disciplines have you now implemented when you invest
or trade to protect yourself against losses?
Trading in the markets is a fantasy or dream to most people. For some
reason, they think something magical is going to take place and poof, they
will become rich. They don’t try to understand it because they believe there
is nothing to be understood. They believe it is mysterious and accept that it
just works that way. Well, it can be understood.
The market is not a mysterious or magical place. It can be figured out,
and people can make money over and over as they come to this trading
wishing well.
If you have experienced trading on the Forex, and you tried to outsmart
the market by not protecting yourself by trading with a stop-loss order, let
me ask you this; how many pips did the market move against you? 100?
200? 300 pips? Did it come back to your entry or were you liquidated? If it
did come back in your financial favor, did you continue to stay in to capture
100, 200, or 300 pips in profit, keeping your risk-reward ratios intact? Or
were you so traumatized and emotionally beat up that when it came back,
you were just too grateful and happy to get out at breakeven or with only 3
to 5 pips of profit, in fear that the market would take it all away again? I
know the feeling, I have been there, too.
I remember sitting on our back porch one evening with my wife, after
one of my many emotional rollercoaster rides in the market; I looked at my
wife and said, “You know, if the government called me up for active duty
and asked me to go to war, I wouldn’t have one scared bone in my body. I
think learning to trade on the Forex is much worse than fighting any war.”
Traders who have attempted to day trade with limited knowledge can certainly
appreciate what I am saying.
After I finally learned how to trade, I realized how important it was to
protect myself at all times. As you learn to trade (or do anything new in
your life) never forget rule no. 1: Protect yourself at all times.
When you drive, when you are at work, when you are on vacation,
when you are swimming in oceans, rivers, and lakes, always remember to
protect yourself. Always protect yourself when you enter into a loving relationship,
when you lend money to your friends and family, when you make
a new investment. Always protect yourself—this is vital to your financial
survival!
Protecting yourself as you trade is called placing a protective stop-loss
order in the market at the same time as you execute the trade. Protecting
yourself as you trade is quantifying how much you are willing to lose ahead
of time before you enter the trade. It is being very clear about one thing: if
the trade does not work out according to my plan, I will be able to emotionally
and financially survive without that loss affecting my life and my
financial security.
Market Traders Institute’s broker of choice is I-TradeFX (www.itradefx.
com). They have an extremely user-friendly trading platform and will
instruct you in how to place your protective stop-loss order every time
you trade.
Protecting yourself at all times, and in every trade, needs to become a
subconscious habit. Never trade without looking at the downside first.
Never trade without saying, “If this trade does not work out, can I afford to
lose x amount of money?” Protect yourself at all times, and if you take a
financial loss, do not take it personally. Trading without protective stoploss
orders is outright exposure to financial self-destruction.
As you learn to trade and gain some experience and taste some success,
you step into an arena of false security. That is why people drown in
the ocean. They swim with insufficient respect for and knowledge about
the ocean—a false sense of security, a feeling that they are greater than the
force of the ocean—and they drown. What is amazing is that when someone
drowns in the ocean, the ocean meant no harm. It was just doing what
it does . . . it just exists.
Like the ocean, the market exists with no feeling, and without the
proper knowledge and respect for the market, you, too, can drown financially,
and if you do, the market will feel nothing. “Fear always springs
from ignorance.”
Trading without a protective stop-loss order ignores the potential damage
the market can do to you psychologically, emotionally, and financially.
If you enter the market without protection and trade without a protective
stop-loss order, you are the perfect candidate for a major catastrophic, lifealtering
event in your trading career. Events that move the market 500 pips
in a direction don’t happen every day, but surprise fundamental announcements
happen all the time.
Read More : What Is Equity Management?
