Before you cross the road, it’s good to know that a car could kill you. Wouldn’t you agree? What did your parents teach you to do before you cross the road? Look both ways!!
And it is the same with trading.
Before you begin – it’s vital that you clearly understand the risk of trading.
You must know where the risks are expected to come from – and you must also anticipate where unexpected risks may come from.
You must be aware of the potential damage that may result if you do not correctly identify the risks.
You must understand the risks before you fully understand the significance of the risk control strategies that you must employ to ensure the safety of your money.
It’s Not Wrong To Be Wrong
I had been wanting to write about this idea for a while – about what to do when you’re wrong in your trading… but it wasn’t until a community member asked ‘Can you help me stop making mistakes in my trading?’ that it was easy to answer…
The first thing you’ll learn about trading or speculating – be it cryptocurrencies on Poloniex, stocks on the NYSE, or commodities futures contracts on the Chicago Mercantile Exchange – is that, you are going to be wrong many times. Since you can expect to be wrong on a regular basis, then being wrong, actually, is not a mistake – would you agree?
In fact, many of the top investors will tell you that they are wrong 70% of the time and they are only right 30% of the time – and yet they bring in high returns and fantastic percentage gains!
How Can This Work?
If you are wrong 70% of the time and you’re only right 30% of the time… how can it be that you end up making money??
The truth is, most people who are new to trading the markets end up losing money – and I’ve heard a similar story from subscribers who have tried trading several times, lost money at it, got frustrated and went to test their luck on gambling platforms that I avoid.
(I don’t even buy lottery tickets. They are another scam the government uses to profit from the gullible.)
Now that we know that we can assume we are going to be wrong, that we are certain to make mistakes in our trading as we learn – lets study the categories of mistakes we will face as traders – and then come up with strategies that we can practice in order to reduce the risks of the most preventable errors.