Very important point Damian.
As was just mentioned in the psychology thread, the way we think is primarily a function of the society in which we were brought up in. As M.Douglas (again, I hate quoting books, unless they are logically researched History books) rightly points out, we are bombarded with negative statements from the time we are born, and our educational systems penalise us for been wrong!
It is no wonder we find it very hard to admit we are wrong - as it is instilled in us from the moment we are born, but this is due to the society in which we are brought up in, not due to our basic human nature.
In fact, our basic human nature is the very opposite. Man is naturally creative, and it is this creativity that has yielded all the advancements that we see in our present time.
Going back to History, we find that from the onset of the Industrial Revolutions, which is considered by many as a key turning point in the development of societies and cultures, the medium, or means of mass communication, has been utilised by the select few to maintain their dominance over the majority.
This continued well into the 19th century, and it is only in the last 100 years that the medium has allowed the "masses" to break free of the mighty reign of the select few in power.
I digress, but as always, it is what helps us to produce consistent profits is all that matters.
I stated in the past that the Phantom’s rules were the golden rules of trading. I am now changing my view on this. The first, and most important rule, is to develop a system that puts the odds in your favour. If you don't have a system that, on average, gives you some winners, then no matter what you do you will eventually be bled dry.
Think about it, if you can't enter the market, say with 10 trades, and get at least 4 of those trades correct, how the hell are you going to make any money!
Some will say that exiting is more important than entering, but I now say NO, entries are the key. Again, just stop and think about it. If you p[lace 10 trades in a row, and loose on them all (which I have done recently) then exits don’t even come into it :!: :!: :!: :!: :!: :!: :!:
Sure you have to exit, to preserve your capital, but if you keep exiting all the time, well, need I say more!
Perfect entries, and once entries are perfected, then you can look at how to maximise profits by exiting the market.
Perfecting entries is of course not easy, so you must use a systematic approach that has a proven track record of delivering a good win /loss ratio.
What better place to look than to look than at what the professional traders do - after all, this is what they do day in and day out, 5 days a week, all year long.
So, Knowing Where To Get Out When Wrong is indeed very important, but not as important as having a system that enables you to enter the market with a good chance that, on average, the trade will move in the direction that you anticipated. I will be very happy with 4 out of 10 - that means that I am willing to loose on 6 trades and win on 4, because I know that once this is possible on a consistent basis that I will be able to make money by keeping my losses small and learning how to maximise my profits when in my winning trades.
Once the systematic approach has been discovered (I say discovered, as there are numerous approaches that have proven methods for identifying low risk entry points - the fact that it is low risk means that the trade will have a good chance of going the way you thought it would go) then, and only then, should one worry about exiting for profits.
Regards,
