Share
550 Posts.
lightbulb Created with Sketch. 65
clock Created with Sketch.
27/08/17
07:36
Share
Originally posted by Freehold
↑
The biggest issue I encounter with new traders is the trade parcels that they invest are way too big often 100% of capital in 1 position...
Are you trading too big ?? Here's the test... If you trade a position and it goes against you say 20% loss quickly ... and that makes unduly worry at all or even lose sleep then your parcel was too big... Reduce it to a size where a quick 20% move against you does not bother you in the slightest and you sleep well. If your position size is so pitifully small that you think what the point then look at my example below.... and build up to it. Once you get your ducks lined up and once you get your experience "stripes" ... your gains will go exponential. How fast they go exponential is a function of how fast you can learn.
The main issue with newby's is, I think, is that they have come to the market with elevated expectations and often they are desperate to make some fast money , have heard overnight millionaire stories... etc etc ... So go way too hard to early .
Think of it like your 16yrs son's 1st time driving... he jumps on a high powered motorcycle for the 1st time in heavy traffic, in wet conditions, at night with no helmut or leathers or lights and a deadline to get to some destination urgently he's never been before. Its inevitable that he will come to grief.... What should he be doing to start out? ... Read as much theory on road rules as he can before he looks at bike, then start practicing riding on low powered scooter, with full safety gear, in daylight , in the dry in a empty carpark somewhere on a Sunday.
Taking big positions (in % terms of your portfolio) early in your trading journey is akin to driving high powered bike very fast in conditions like I mentioned above ... you fall off the damage is major. No one in their right mind would think of doing that on a bike .... but when it comes to their hard earned money they seem to have a blind spot for risk.... 95% of novice traders will be injured beyond repair in their early trips (within a year or two) and never ride again. Its a grim toll.
Expand
Guilty. Position size is certainly my weakness. At least I am aware of it, is that the first step to overcoming addiction? I got caught not because of the fall (gapped down, stop failed), but due to the position size. Yes the price and position size work in tandem but we cannot control the price, only the holding size.