Wednesday, December 19, 2012

2 trades eating all the profits

Stock market is a profession where you would be learning a lesson on daily basis. I guess this is one of the reasons why I'm staying humble in my life. For the first 15 days, I made 25% gains on my capital. I took one big position and from then I was not able to manage it. Just imagine two trades wiping out your 25% gains. This is one of the biggest blunders I’ve committed in my trading. Couldn’t digest what I’ve done with the trades. I know that I should cut my losses. I guess I should go back to school and learn how to maintain discipline in my trading.

Lessons:

Never take a position that is not possible to manage.

Always think negative once you take your position. 


I’ll explain both these lessons. Managing a position is important in stock market. One should have reasonable control over position. We should make sure that we shouldn’t afford to lose more than 2% of the capital (Total Capital). In my case I was just complacent ( 25% profits in less than 15 days) and took a position that instantly became out of my control and didn’t had the common sense to book the loss once I saw the weakness in the particular position.
If you didn’t have the inclination to book loss then you’re preparing for the disaster. This is one of the biggest lessons I learnt in this month. I have taken a vow not to do these kinds of trades in my life time and I believe I wouldn’t do that in my trading.
It is important to develop negative thinking in trading. I know I would receive some rants, but let me explain the thesis behind this thinking. If a trade goes according to our plan then there is no problem for us to make money in the markets. Only when it goes against us, we should have a strategy to manage it and comes out with minimum loss. I’d recommend traders to always think negative about their positions and dig deep into the negativity to find solution for the problem. I didn’t have this negativity and as a result I’ve given up all my profits I made in just couple of trades. It’s a pain and I’m feeling like an Ass****!

1 comment:

  1. Good post. What positions you took. please explain.

    ReplyDelete