Hello Traders, I’m Mani and I’m the writer of Trade 77 section, please follow me on twitter for further updates.
This article is from a valuable section of the book “Warrior Trading”.
Here is the trick of learning in the markets. After a loss, warrior traders examine the market behavior, the price action, and the fundamental forces that drove the market in a different way from that which was expected. So far, so good, but warrior traders also examine their own thinking and the emotions they had that played a role in their defeat on this occasion. Were they greedy? Were they fearful? Were they complacent?
To my mind, complacency is the greatest sin of all in the markets. No other error generates the immediate and significant losses that complacency produces.
These are errors of attack, but there are also errors of defense. Failure to set the stop loss wide enough is an example of lack of commitment. Were you trying to make a lot of money without being committed? Were you skimping on the price of the ticket to enter the arena? In warrior terms, did you fail to commit sufficient forces to get the job done?
The ultimate strength of warrior traders is their ability to invest their forces at the right time at the right place of battle. But you must be committed. Complacency can lead equally to an error of attack or one of defense. An example of an error of attack would be to employ too great a trading position in order to allow for the usual
stop-loss margin for that trade. An error of defense would be to set a very tight stop loss, believing you were about to have an easy victory. They may sound the same, but there are subtle differences between these two scenarios.
The lesson for warrior traders is to not become too excited about early wins. If you do so, you will sabotage any chance of total victory. Keeping everything in perspective is easier said than done, but it is precisely what you must do. It is also vital at all times to have a realistic understanding of the strength of your own forces. What is your bottom-line profit and loss situation? What is the balance of your trading account? Should you proceed
with caution or aggression?
In The Art of War, Sun-tzu suggests that one should seek victory only after the battle has been won. What is unique about trading, and what warrior traders come to understand finally, is that the battle is, at its core, with oneself. And this personal battle is won only through the experience of battle itself, through the constant refining of one’s approach. In this ongoing state of total victory, immense fortunes can be made.
Total victory is, then, continuous victory—regardless of whether a particular individual battle was won or lost. Total victory is the winning of the war, and the war is never-ending.
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