Monday 20 April 2009
Reversing the Danger of Easy Come, Easy Go...
This is related to the ‘learn how to take a loss’ concept and the essence of this is as follows. You’ve had a great run of winners and even some losers but on balance you’re up big time. I’ve seen many traders do this and some do it several times before they get wiped out totally. Let’s say your account has gone from $50,000 to $100,000 in the space of a few months. Whilst this is great, I’ve found it more difficult to hang on to profits as opposed to making them and this is because many traders in this situation become complacent and even say things like, “I’ve had a great run so I’m comfortable to now take additional risks as it’s just profit and not really my money. In fact, what I’ve made is now play money!”
Would you do this in any other business or would you seek to build on your success? For some traders the ‘easy come, easy go’ Law works perversely perfectly for them. Yet it doesn’t and shouldn’t have to be that way. This is why I advise clients in some instances to take a break for a week or a month or whatever to bring their traders brain back to reality and equilibrium so that when they recommence they’re starting afresh. There’s no need to throw any part of your account up against a wall simply because the profits came quickly. As I said, making it is not the hardest part, it’s keeping it and building on it that sorts the wheat from the chaff. You want to be a successful trader for years not another ‘flash in the pan’ statistic. Resist the natural human urge as much as possible – remember you’re a Top Trader not a ‘mug punter’.
At all times have respect for your capital and don’t fall into the trap of frittering away even 1% of it. Be charitable to a cause not the markets.
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