Recommended Broker!

A Disciplined Trading Plan

August 8, 2007

The better performing traders above chose a good trading system and executed it perfectly. The only difference was their different use of leverage. The use of leverage must be tested and built into a disciplined trading plan. Obviously, leverage must be handled judiciously. It would be beneficial to one’s reward and risk performance to find a way to use leverage only when the probabilities of success are very strong.

Overly leveraged traders without a tested and precisely defined trading plan are merely gamblers who face an almost certain "risk of ruin" and have no chance of success in the long run. Sure they can win and win big for a little while, but no lucky streak lasts forever.

Generally, a long series of wins and wipeout losses leaves the undisciplined trader in the unenviable position of fanaticizing that someday he will enjoy a run of unusually good luck, and then somehow quit the game while still on top. But it is only human nature that when he feels luck is on his side he does not feel like quitting when he is ahead.

Traders quickly making and then just as quickly losing fortunes is a very old story repeated untold times. See the book, Reminiscences of a Stock Operator, by Edwin Lefèvre, describing the experiences of an actual famous trader, Jesse Livermore, who made and lost many fortunes using his instincts with extremely high leverage in the early decades of the 20th century.


To reduce the "risk of ruin", we must have a sound plan to limit our use of leverage and keep sufficient cash reserves to keep our place at the table. It also is very useful to diversify our risk across many trades and across low-correlated financial instruments. Seasoned money managers refuse to risk more than one percent of their capital on any one trade. They can’t do that unless they adhere to strict disciplines that are well tested and designed to insure that they can stay in the game when markets turn volatile.

To reduce such risks, there are many techniques that have stood the test of time. These ideas are so old that they have become cliches, but that does not mean that they can be ignored. The old masters have long recommended respecting the trends in multiple time frames, thus putting the odds in our favor and not fighting the tide.

A strict loss cutting discipline also comes highly recommended, including the use of actual stop-loss orders. Never meet margin calls or average down: never throw good money after bad. Systematically eliminate losing positions and close out the worst performing positions. With a series of losses, cut back size and total risk exposure. These ideas can be back tested and built into a sound trading system.









2 comments:

Anonymous said...

[p]Mulberry Bags It is definitely not advisable to help prune this trees heavily because plant is generally inclined to [url=http://www.mulberryhandbags4uk.co.uk]mulberry handbags uk[/url] aid bleed to the cuts . The image idea of giant animals within the forest is really odd and unreal . Just pay a visit to our site and choose [url=http://www.mulberryhandbags4uk.co.uk]cheap mulberry handbags[/url] a bag you like . The new petrol one will be my favorite . Series with versatile design, for instance apeak inclined bag, tote, mini tote and excellent proportion of hobo . Mulberry messenger bags could be implemented for all kinds of things from traveling to night have on and whichever your situation, you can't go improper that has a leather handbag! Mulberry Designers glimpse over the branded handbags and messenger bags and sort a considered to mulberry outlet happen up with their magnificent that glimpse equal toward the branded usages having said that the glimpse is unquestionably many . That is why budget aware women of all ages of all ages now love to spend money on low cost mulberry bags, wallets and purses . The dual shiny gold sequence connectors are contained in the entire style and design to make sure easy having regarding users determined by leatherette cuts, while a protracted leather-based neck strip enables can differ carrying, whatever kinds of transporting methods you need, that include handling the concept or donning for that shoulder, what you may perform would be to enjoy easeful excitements joined with many fashionable Mulberry Outlet . We never delve into the realm of politics here, but we do hope [url=http://www.mulberryhandbags4uk.co.uk]mulberry handbags sale[/url] you all take the opportunity to vote.[/p][p]0m to [url=http://www.mulberrybagsale4uk.co.uk]mulberry bag[/url] £22 . The discounted expenditures fluctuate from bag to bag as well as [url=http://www.mulberryhandbags4uk.co.uk]mulberry handbags outlet[/url] count about the recognition of design and style . The patriotism is black in abundant blooming trees, which adds an abstruse atmosphere in the workshop . The tackle alloyed belt of the mulberry Alexa backpack is certainly guide . It will save you an individual the Mulberry Small Clipper Holdall as well as the period to obtain [url=http://www.mulberryhandbags4uk.co.uk]mulberry handbags[/url] just about all the data you need from numerous insurance providers . The fall and winter apparel, which is far more dark than spring and summer, make models fuzzy in heavy and complicated background, so bright green skirt outfit as obvious much more [url=http://www.mulberryhandbag4sale.co.uk]cheap mulberry handbag[/url] appealing . There are wide collection of cheap monogram handbags in the 2011 spring and summer series [url=http://www.mulberryhandbag4sale.co.uk]mulberry handbag sale[/url] of Mulberry such as shoulder bags, clutch, tote and more other styles . mulberry cedar in in good appearance form from having a list of main organizations, and therefore pruning laterals towards 6 makes in July that allows you to develop spurs close main organizations.[/p]

Nelson Devon said...

Hi, I agree with you. Really this blog is very informative. forex managed accounts

 
Get Rich With Forex © All Right Reserved
◄Design by Pocket