I have a confession. When I started trading I was definitely on the ‘greedy’ side of the emotional spectrum of market participants. I wanted to make a lot of money fast and I did it. Then I lost it all just as quickly. It took me a couple of years to realise that high risk trading will ALWAYS result in a blown account. Even if I made a ton of money, it would only take a simple drawdown period for me to be back to square one again.
Ultimately though, I was one of the lucky ones in realising my weakness and changing my bad habits that would have ultimately seen me out of this business before I even had chance to develop into a proper trader. I spend a huge amount of my time trying to tell traders about the inherent risks in trading with high leverage and yet still find those very same traders ignoring the advise and doing it anyway – only for them to blow their accounts as a result!
It’s sad to see this happen because some of these traders are actually pretty good in other aspects of their trading but high risk is like the grim reaper, it will ultimately be your calling card.
I think I’ve mentioned this book before but ‘The hour between dog and wolf’ by John Coates explores the reasons why traders make certain decisions at a biological level. Yes you did read that correctly!
Anyway, numerous experiments were conducted with institutional traders and one thing was common among all of them. The guys that traded with high risk ALWAYS ended up failing. Even those who had made stellar returns over 2, 3 or even 5 years ultimately blew up because at some point, taking those high risk trades won’t pay off and those previous years become meaningless.
So when I hear and see individual traders putting in some pretty decent returns on their accounts, but as a result of trading way too big on a single position or using nightingale in an irresponsible way, I know it’s only a matter of time before the reaper arrives. They can actually ‘get away’ with this type of trading for quite some time in fact, but all that does is cement a bad habit. Ultimately, they will get caught and caught badly.
My advice is think about being around for the long term because trading like that will guarantee you’re not. Be patient and make your money slowly. You can still do extremely well from trading without having to do this.
Moving over to the markets, there’s very little point discussing what may happen due to the volatility coming with the election this week. Stay safe and stay flat through the election. Brokers love a hero, but your account balance wont….
Have a great week
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