Tag: stock investment

Lately I’ve come to browse a book by Alexander Elder, Trading for a Living. reviewing his concept of the three Ms: Mind, Method and Money Management and I find it funny the way he treated psychology the trader, traders comparing the losers with Alcoholics Anonymous. Elder recommended investors to operate in the stock market faced with losses in the same way that people in Alcoholics Anonymous is facing alcoholism. Even advised his “twelve-step method”, replacing the word alcohol with the word loss. Elder explains: The drinker can not resist the temptation because he continues to feel and think like an alcoholic. The trader does not know how to prevent losing their habit because it continues to lose feeling and thinking as a player.

The alcoholic’s life goes downhill, out of control, when he denies being an alcoholic. He denies that alcohol control your life and feeds the fantasy that is able to leave at any time (as smokers). Or thinks I drink or change reduce some of the solution to the problem. The trader losing his mind erodes gradually merging savings, being plucked while denying that it has lost its way in the markets. You can not accept the painful truth and the hidden himself and others.

He speaks of his successes but never their failures. The drinker of Alcoholics Anonymous sobriety learns that begins in the mind of people. Traders learn to survive on the Stock Exchange that the problem was not with the methods or in the market, was in their minds.

The loser is changing markets, strategies, or trading systems. Making impulsive positions, trying to recoup operating over the previous loss, as if to take revenge on the market. Its capital is shrinking as he tries to recreate the pleasant sensation of winning. Increasing risk-taker, purchasing all the books with the final to win the final system on the Stock Exchange, seeking advice from consultants, blowing, inside information. Reverses the direction of their positions continually bend their positions when prices fall.

The loser does not realize that he can not stop because he’s addicted to the excitement of the game. A professional trader, if you have a long series of losses takes it as a sign that something is wrong. So to invest and review their methods and their analysis. You first have to change your mindset if you want to stop the losses and begin to recover. In the words of Mark Douglas The Disciplined Trader, trading is a mental discipline.

Neither more nor less. I also hit rock bottom a few times. I know how it feels. Then I stopped, checked the records of all my trades and found that among the three groups of errors (errors of method, errors of discipline and capital management errors), I always made the same five specific mistakes over and over time. My weaknesses identified five trading wrote them in a card and hit the side of the computer screen. So every morning, before launching any operation, read and check I will “fall back into the same.” Each day watching it right, such as Alcoholics Anonymous every day watching to stay away from alcohol. Investing in the stock market should be taken as a business to make money, not as a game. Reasonable losses always exist and are part of the business. But you have to tell when you lose as a professional and when you lose a player. Having defined the reasonable risk per trade (based on capital and the Stop Loss limit, including commissions), the practitioner will not accept losing a euro more, will no excuses, no false hopes and unemotional. To do otherwise would behave as players.