Falling down in life is normal.How many times did Donald trump fall
down before he could make it?
Falling down is part of the cycle of life, a time for introspection, for learning from one's mistakes and going on to better things in the future.
When it comes to the markets we really are our own worst enemies when it comes to the nuts and bolts of our trading decisions to help us towards better things in life. There is nobody else to blame.
Savvy hedge fund Long Term Capital Management with its star-studded board of directors still went belly up because they squeezed all their risk allocation into one almighty corner from which they could not fight their way out. Read - http://en.wikipedia.org/wiki/Long-Term_Capital_Management
Wall Street Titan Bear Stearns - read - http://en.wikipedia.org/wiki/Bear_Stearns came undone with its hedge fund exposure to the booming USA property markets as did the venerable behemoth Lehman Brothers with massive property underwriting exposure in 2008 - read - http://en.wikipedia.org/wiki/Lehman_Brothers
And so on and so forth - multiple stories of trading giants getting stuck in a corner and ending in a liquidity crisis because they did not assess their risk exposure properly.
And these were supposed to be the very best in the industry?
In short - too many eggs in one basket!!!
Away from the stellar giants that do periodically fall, the little traders of the world are usually no better in understanding how risk needs to work for them.
Essentially, risk and opportunity are 2 faces of the same coin. They are simply the 2 different faces of the price volatility of a product. The product could be real estate; the risk being the downside in price, and the upside being asset price increase. In either direction, capital will either grow or diminish according to the direction of price volatility.
The same can be said for interest rate prodcuts like Treasuries, or a stock like Microsoft, a commodity like Soybeans, or a currency like the Euro. Every product moves in valuation over time. Nothing remains static. and risk and opportunity lie at every turn.
Given that a small time trader has limited resources there is wisdom in steady growth if only patience can be taught in that not all desires can be achievable in the short run.
The biggest problem that faces the small time trader is not the size of capital, but more rather, a preoccupation with a sense of Time. We are obsessed with Time; we are always in a hurry to get things done. We don't seem to realise that no matter how fast we want to go somewhere we just cant make Time go fast enough for us.
Then we run and then we fall and in the falling we have forgotten that the markets are merely numbers there for the taking. The markets are not our friends and they are not our enemies. We can use the markets to set price targets, but then we become preoccupied with Time and ask ourselves how soon we can hit this target number, and then we lose all sense of direction when our emotions take over and we forget the numbers game.
This is why the forex markets are dreadful platforms. You want a stage to go hang yourself sign up for a forex trading account and fool yourself to believe you will make money in the long run. The pressure of day trading will make you lose touch with the numbers game and the nature of human impulse will cloud rationality as losses compound from minute errors and human pride attempts to salvage and then goes make a mess of itself in a heap.
True risk allocation is about understanding that in time the seasons will change and that all things do grow as part of natures cycle of growth, death and ressurrection.
Eggs in one basket is the fastest way to fall into a liquidity trap. How many highly intelligent people got caught out in US real estate from 2007? a more diversified approach calls for eggs placed in low risk asset classes, as well as high risk asset classes. Real estate, Fixed Income, Equities, Commodities and Forex; with the later 2 being the high energy exposures to complement the first 3 lower growth opportunities.
Given time and with patience any trader and set upon a journey to success if it can be understood that the markets can be your friend instead of your enemy. They fall those that run. It's a numbers game with no need to hurry and stare at the computer screen all day long. But even the brightest stars are wont to fall. it would take a radical revolution in human nature not to become impulsive and discard the very essence of humanity. But in saying that, at our very best we can reduce our foibles, if we had a base anchor we could always refer to. that anchor would be an understanding that all the eggs must be spread into several baskets and not just into a single high octane driven market like forex which could serve you well or become highly detrimental.
Proper Planning Prevents Poor performance.
And to plan hand in hand with the numbers game is to position yourself like a tree for many branches to grow in time to come.
Forex could become a cruel predilection but equally a fascinating growth portal if the trader could work with his own size shortcomings and learn to position trade rather than day trade all the eggs.
Pieter Bergli - DeLoren Trust Holdings
Slow and steady trading wins the race. Forex education for all.
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers.
