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THE NEW TRADING OF A LIVING- GOOD RECORD-KEEPING

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THE NEW TRADING OF A LIVING GOOD RECORD-KEEPING “ There is no free lunch. As with so many other things, either you’re going to pay  up front or you’re going to pay on the back end for being disorganized, and  unfortunately, when you pay on the way out it’s always more expensive...” writes  Andrew J. Mellon in Unstuff Your Life.  The market is perversely inconsistent in dishing out rewards and punishments.  There is always a chance that a poorly planned trade may bring profits, while a well- planned and carefully executed trade may end in a loss. This random reinforcement  subverts our discipline and encourages sloppy trading.  Good record-keeping is the best tool for developing and maintaining discipline. It  ties together psychology, market analysis, and risk management. Whenever I teach a  class, I say: “Show me a trader with good records, and I’ll show you a good trader.”  Writing down your trade plans will ensure that you don’t miss any essential mar ket factors. 

THE NEW TRADING OF A LIVING- RISK MANAGEMENT

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THE NEW TRADING OF A LIVING RISK MANAGEMENT A good trading system delivers greater profits than losses over a period of time,  but even the most carefully designed system doesn’t guarantee success in every  trade. No system can assure you of never having a losing trade or even a series of  losing trades. A system is a plan, but as Helmuth von Moltke, a nineteenth-century German  field marshal, wrote: “No plan survives contact with the enemy.” The U.S. boxer  Mike Tyson, quoted by The Economist, put it more bluntly: “Everyone has a plan ’til  they get punched in the mouth.” This is why risk control must be an essential part of  every trading system.  The inability to manage losses is one of the worst pitfalls in trading.  Beginners  freeze like deer in the headlights when a deepening loss starts wiping out profits  of many good trades. It’s a general human tendency to take profits quickly but wait  for losing trades to come back to even. By the time the despairing