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to be right more, or to larger degree, than it is wrong. I learned this after a couple of months of standing in the pits with no clue of how to make money. A big trader tapped me on the shoulder and said, "Hey kid, make a hundred trades and then come talk to me!" I thought he was crazy or trying to get rid of me. But I took that little piece of advice and it kept me trading on the floor for eight years. You can't judge anything from one trade; after 100, you have a plan. And after a thousand trades, there is nothing you have not seen. Trading involves drawdowns and runups in equity, and you have to deal with them both to trade. Don't get stuck in the trap of trying to eliminate all of the drawdowns, which would be just as unrealistic as extrapolating only the winning trades into a projected return. |
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Tom's #1 Rule for Trading: If you buy the highs and sell the lows, you will collect all of the winners and miss some of the losers. This simple rule swings the probabilities in your favor and helps to limit the big negative outliers. If you place an order under the market to buy, you will own all of the losers and miss some of the winners (same for sells above the market). This swings the probabilities against you and makes your job harder. |
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The money in trading is made by taking away the opportunity from somebody else. It's a very competitive sport. If you were trading on the floor and it was 4 bid at 5 and 5s are trading, would you buy them or sell them? Buy them! Be the first 5 bid! Now it's 5 bid at 6 and you can offer 6s. You would have participated in one of many "mini" trends that make up the daily trading on the floor. Trading systems look for breakouts of some sort to signal the beginning or existence of a trend. Whether it goes from 4 to 6 or 400 to 600, the principle is the same. |
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Although this concept of going with the trend is common to many markets as well as futures trading, some people adapt to it more easily than others do. I think it's one of the reasons some people have so much trouble trading. I hope this idea can help you adjust to the frame of mind that you need to trade. If you are looking for systems that use these ideas, you can contact me at PMB Inc., (800) 598-0631, or at systems@pmbinc.com. |
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