Basic Principles Of Trading Stock
By Ultimate Trading
Once you decide youre going to participate in trading stock, you can't change your mind - you're in for the duration.
To operate effectively in any environment where you trading stock, you
need rules and boundaries to guide your behavior. Its a simple fact of
trading stock, no matter what system youve developed, that the potential
exists to do financial damage to ourselves damage that can be greater
than we think is possible.
There are many times when trading stock in which the risk of loss is unlimited.
To prevent the possibility of exposing ourselves to damage, we need to
create an internal structure in the form of specialized mental discipline
and a perspective that guides our behavior so that we always act in our
own best interests. This structure has to exist within each of us because
the market doesn't provide it for us.
The markets provide structure in the form of behavior patterns that indicate
when an opportunity of trading stock exists. But that's where the structure
ends - with a simple indication. Otherwise, from each individual's perspective,
there are no formalized rules to guide behavior.
Even gambling games have built-in structures that make them much different
from trading stock and a lot less dangerous. For example, if we decide
to play blackjack, the first thing we have to do is decide how much we
are going to wager or risk. This is a choice we are forced to make by
the rules of the game. If we don't make the choice, we don't get to play.
When trading stock, no one (except yourself) is going to force you to
decide in advance what your risk is. In fact, what we have is a limitless
environment, where virtually anything can happen at any moment and only
the consistent winners define their risk in advance of making on a trade.
For everyone else, defining the risk in advance would force you to confront
the reality that trading stock has a probable outcome, meaning that it
could be a loser. Consistent losers do almost anything to avoid accepting
the reality that, no matter how good a trade looks, it could lose.
Without the presence of an external structure forcing the typical person
involved in trading stock to think otherwise, he is susceptible to any
number of justifications, rationalizations, and the kind of distorted
logic that will allow him to get into a trade believing that it can't
which makes determining the risk in advance irrelevant.
Once you decide youre going to participate in trading stock, you can't
change your mind you're in for the duration.
That's not true of trading stock. With trading stock, prices are in constant
motion, nothing begins until you decide it should, it lasts as long as
you want, and it doesn't end until you want it to be over. Regardless
of what you may have planned or wanted to do, any number of psychological
factors can come into play, causing you to be distracted, change your
mind, or get scared or overconfident. In other words, you can behave in
ways that are erratic and unintended.
trading stock has no formal ending. The market will not take you out of
a trade. Unless you have the appropriate mental approach to end a trade
in a way that is always in your best interest, you can become a passive
loser. Once you're trading stock and losing, you don't have to do anything
to keep on losing. You don't even have to watch. You can just ignore the
situation, and the market can take everything you own. One of the many
contradictions of trading stock is that it offers a gift and a curse at
the same time.
The gift is that, perhaps for the first time in our lives, we're in complete
control of everything we do. The curse is that there are no external rules
or boundaries to guide or structure our behavior. The unlimited characteristics
of the trading environment require that we act with some degree of restraint
and self-control, at least if we want to create consistent success when
trading stock. The structure we need to guide our behavior has to originate
in your mind, as a conscious decision that will guide your actions.
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