I will have to respectfully disagree with just about everything savioursofpop has written. I think these golden rules are crap.
But first of all I must kind of reintroduce myself. In 1990 I wrote a manual How I Quit My Job and turned $6,000 into a Half Million Trading. It took me about six years to get to the half million in profits and I took out most of the money to live on during those six years.
When I started out my net worth was close to zero and I took out a chattel mortgage on my old car, my clothing and my furniture to borrow the $6,000. I wanted something better for myself and so I was willing to risk everything to get it. Successful speculators are risk takers and there is no comfortable way to do it. If you want to do what I did everyone will tell you that you are crazy.
I published my broker statements in my book and offered a $10,000 reward to anybody who could prove they were fakes. No takers. To my knowledge nobody has ever done this before or since.
I stopped selling stuff in about 1993 because it was too stressful listening to all the stories. But what I came away with was that very few people can follow a system and many people were born to throw their money away.
I have since gone way beyond where I was nearly 20 years ago and have actually traded over two billion dollars in trades using almost the same stuff that I used to sell.
I keep good records and none of the things I do follow the rules articulated by savioursofpop. Just one example is: my average losses are always larger that my average wins. But I win more than I lose. That is just simple math. 3:1 profit to loss ratio is the trader’s road to hell. It can’t be done.
In fact most of the stuff I read about money management and “good trading systems” is pure garbage and it is not the approach we have used for nearly two decades of profitable trading.
In fact I would submit that following the rules suggested by savioursofpop will assure that you will fail. Systems offering a 3:1 ratio will probably finish you off with the first losing trade. I have spent years researching this.
And a couple of other points: Price stops cause more losses than anything and shallow stops are worst of all. Try time stops instead.
Cutting back your exposure when you are losing will result in you cutting back just at the time your system starts winning. This has happened to me dozens of times.
I have traded millions of dollars, but my interest today, nearly 20 years after publication of my book, is, using almost the identical methodology, can it be done again? That is can you still start out with a few thousand dollars and make it to the big time? That is what I would like to test.
I am building a website at
www.einsteinstocktraders.com and am putting up real time trades from a purely mechanical system twice daily to prove my hypothesis that nothing really changes about markets and there are no secrets about systems and how markets work. What worked nearly 20 years ago still works. It is really not the system, but the trader who uses the system that is the critical ingredient of profitable trading. The system is just a tool.
I have not sold one thing on this web site to date, but if my comments interest you might want to read my thoughts in a little more detail and observe our real time trading as it unfolds. I put up everything: the good, the bad and the ugly. I am not a broker or fund manager.
We have to wade through a lot of crap to get to the gold. It’s not easy, it is not for everyone, there is no Holy Grail or comfortable way to do it and there is no free lunch. But yes, it is quite possible to make a lot of money trading.
