A good read whilst your twiddling your thumbs waiting for your trades to go in the right way....
"It is in quiet moments such as these that I sometimes take time to think over things, and today I thought I would send you this, which comes to me after a conversation I had with somebody the day before yesterday..
As you know, greed and fear are powerful emotions, and therefore equally powerful motivators. But there's something else we have to be on the lookout for when we are trading, or it will play havoc with all our carefully designed risk management and money management parameters.
This is euphoria, and it can easily manifest itself after a long string of successful trades. When it does, it can lead to recklessness - and this is where we can so easily compromise our trading capital.
It is so easy to see it, but the unfortunate bit is that we usually see it after the event, and more importantly after the damage has been done. What happens is that if we have produced a long string of successful trades, we can begin to feel invincible, and we forget that our next trade carries the same risk/return profile (given a similar setup) as all our previous trades. So, feeling invincible, we crank up the stake, and put on a trade that is completely outside our prudent risk management parameters.
However, that is only the first part, for now, there are two possibilities: One the one hand, the market might go our way, and we make more money, or else the market might go against our position and we start to lose. What then happens is that our old enemy Fear comes to the fore and we are paralysed! Where is our stop? Do we move it further out? Do we cut the loss now? And bingo, we have fallen right back into our first trading mentality, in which the destructive emotions greed and fear are once again firmly in the driving seat!
Well, that's quite a sobering note for a Friday morning - I didn't mean it to be so heavy, but there we are. A thought for you to chew over on this quiet (so far) morning.
Let's be careful, let's stick to our sytems.
Kind regards,
William"
