Thursday, April 23, 2015

Winners and Losers

Traders possess a plethora of methods to analyze the financial markets with a well-defined protocol to discern a winning trade opportunity. Traders will bend, mould and shape the use of their tools to help them assess high probability opportunities that will become profitable trades.
A challenge arises when the trader will employ a specific protocol and method that results in a nicely executed, managed and winning trade. On the following trade, in a market environment that appears very similar to that of the winning trade, the trader executes in exactly the same manner only to take a loss. This experience repeats itself on the following two occasions, which result in three consecutive losing trades. The trader is then baffled by the fact that the same method that made a nicely paying trade, also resulted in three losers. Consequently, the trader decides to pass on the next trade that displayed almost identical characteristics to the winner and three losers. Naturally, the trade ended up following the rules consistent with the traders’ methods and netted a winning trade. Still fearful of taking another loss, the trader again passes on what looked identical to the series of losers and winners of the past. Of course, it was another winner!
What the trader must be aware of, assuming disciplined trading, is that every winner will look like the last loser at some point in the process.

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