Can you trade with 100% success?

Over the years, I’ve witnessed some pretty amazing events from trading the financial markets. I’ve experienced most styles of trading too; from volume analysis, Fibonacci, market profile, Gann, price action, indicators and even lunar cycles. Any style of analysis can be profitable but I’ve yet to see any single style better than the other. Generally, it’s the individual trader that makes it work or not. But there’s one thing in common all these styles and more have; none of them are right 100% of the time….

Around 12 years ago, a trader got in touch via email asking for advice. He had been trading with a particular style and had been doing really well. He’d had a number of winning trades (he was a swing trader) and had become so confident in his strategy that he decided to re-mortgage his house to release £40,000 of equity to add to his trading account. Obviously you NEVER trade on credit but the story gets worse…. He hadn’t told his wife either…

He was a school teacher and so earned an average wage and saw this trading as a way of making some serious cash – which of course you can indeed do if done correctly. So he topped up his trading account with the £40,000 and then took a whopper of a trade on the S&P 500 because his strategy was essentially telling him to short it.

The S&P started to rally so he sat on his position ‘because it always came back like it did in past trades’ he told me. Only this time it didn’t. It just kept rising and rising over a period of weeks. He sweated on his position with no stop loss in place because he thought he would ultimately be right so why put a stop on right? Well not this time and he was ultimately closed out with a margin call and over £50,000 in losses.

It was at this point that he contacted me as he was now down to around £1000 and he wanted help to turn it back into £40,000 as quickly as possible so that he ‘could repay it back off the mortgage without his wife ever finding out’. He had become a desperate man with a crazy idea of trying to find a way of turning a 4000% return in quick time which obviously is ludicrous. The best advice I could give him was to sit down with his wife and explain what happened and start looking at doing some exam marking to make some extra funds to repay the loan.

No one is going to be able to trade well with the pressure that he put round himself at that point so the best thing he could do was in fact not trade. He simply didn’t have the trading skills to handle the situation.

So if you know you cannot possibly be right 100% of the time, why take crazy risks with your hard earned money? Unfortunately this is not an isolated story. People become so convinced they have found the holy grail that risk management gets cast aside and the only thing that does become 100% certain is their ultimate downfall. So as always, discard risk at your own peril. You can make extremely good returns as an independent trader without ever having to bet the proverbial ranch….

Moving over to the currencies, I’m writing this piece on Saturday so don’t know what Monday did as you’re probably receiving this on Tuesday. However, I believe we’ve had a game changer move in some of the markets after Yellen’s speech last Friday. The Euro has already tested its 500dma (red line on chart) a week ago and the sell off last Friday could mark the start of a more substantial fall on the back of a more hawkish Federal Reserve.  Unless Friday’s high is broken, sellers are in control and the only thing I see that could trump this is Donald Trump himself in the upcoming U.S. elections. Although we could have some consolidations after this move, Friday’s non-farm payrolls could add the additional kicker if they come in strong…

Have a great week

Charlie Burton

Ezeetrader.com

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