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.
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By rahul roy -
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