The reason it may seem to be difficult to make money as a trader is summarized best by the following paradoxical statement by Ray Dalio in the book Hedge Fund Market Wizards:
”In trading, you must be both defensive and aggressive. If you are not aggressive, you don’t earn money and if you are not defensive, you will not keep your money. ”
To try to balance between being aggressive in order to be able to earn money whilst being defensive to keep the money you have earned, it is the most fundamental problem that a trader faces in the market. Today’s lesson gives you tips on how to keep the two in balance, so that not only can you improve your chances to earn money on the market, but more importantly, to not give the money back to the market.
How to be an aggressive trader, but not too aggressive
As a retailer, you face the constant temptation to trade too much and risk more than you are comfortable with for that there is always an ulterior motive to you can quickly become rich. It is very difficult to ignore such a tempting thought because of all the emotions that are within you.
In other words it is extremely easy to be too aggressive on the market. But as you may well know, so can aggression be a quick way to lose money and possibly combing out your trading account. But you need to be aggressive enough, if you want to make money, so how do you find the limit of not being too aggressive?
There is no answer that can easily solve this problem for you, it is rather a combination of realisations and the abilities you need to acquire and implement. Here is a quick list of these realisations and abilities to help you to find the aggressive ”balance”:
You need, first and foremost, of course, know what you are looking for in the market (what your trading strategy is), and then commit to only trade when the strategy presents you with a signal.
Realize that you can not hesitate when your trading strategy gives you a signal to trade. Doubt and fear has no place in the successful trader’s mind. You need to know what you’re looking for, and act without hesitation on the signal when it occurs.
Remember, To be relatively large at two or three deals per month, which exactly meets all the criteria under the action plan, is much more intelligent than to constantly be on the market on a bunch of random shops that basically only pure spelchans.
What you need to do is to be aggressive, but with moderation. If you are too aggressive, you can lose money by trading too much (over-trading, risking too much, or the worst possible combination of the two. In other words, save your ”bullets” for the easy / lucrative targets, so you get the best deal for the money.
When I shop, I go into ”large” in relation to my account size, but since I just is maybe 2 to 4 times a month could I probably be less in relation to my account size than a trader that goes into the 20 or 40 trades per month, each with a small dollarrisk per trade.
How to be a defensive trader, but not too defensive
On the coin’s back, you must be defensive in trade, but not for the defensive. As I said earlier, gives traders often back their trade profits, usually all and more. This can be very frustrating and it is a big reason that most people fail to make money in the long term on the market.
Once again, it is no easy task to find the space between being too defensive and not defensive enough. But the following tips will make it easier for you …
Withdraw some of the winnings at the end of the month, if you had such. If you do, you will not only see to it that you can’t give them back to the market, but it will appear that it is your (real) money and not just digits on your computer screen. In this way, you will begin to see profits as something more real and it should make you a little bit more defensive with them.
Realize that there will be more emotional and thus most likely to you give back your winnings just after a trade. Do not jump directly back to the market without any reason after your previous trade is closed. Monitor yourself after the trade, whether it is a profit or loss. Make sure you do not jump back to the market on a ”whim” to give back the profit you just made. Profits are not easy to do on the market, so protect them.
Realize that you do not need to trade every day, or even every week. Think so, it is the best and the most lucrative way.
In trading, you must be aggressive enough to get the most out of the positions when they arise, but you must also be defensive enough to not give back profits you have made. By learning an effective trading system, combining planning and a healthy dose of patience, discipline and common sense, you will find the best balance between aggressiveness and defensivitet that leads to long-term success.