Proper questions for traders Hi traders. Our development in trading depends on what questions do we ask. What do I mean by that? The better questions we ask in our learning, the better answers we will get. I work with traders educating them for about more than 3 years now. I and will say to you, that most traders ask wrong questions. In this article I want to make a top-list of most popular questions that should be rephrase to give trader a chance to succeed.
Bad Question: How much will I earn with trading?
This question is very understandable, because every trader comes to the market to earn money after all. But this questions assumes that profit in trading is guaranteed. In fact, it’s much harder to survive in the long run than to earn in short-term perspective.
Every trader can pick good trade from time to time, but there are too many factors that keep trader away from moving forward. It can be either psychological factors or market understanding, but statistics is merciless – around 70% of trades (and in fact, even more) lose money in the long run.
I hear many times from traders what I call «10% mantra». They say – «I can earn 10% a month safely, if I try to make 20-30% it will be risky». It is far from true. So, question that sounds like «how much money will I earn with trading» is equal to «how many tigers will I kill hunting in jungle»? When task of survival is not achieved, talking about profits makes no sense. First trader needs to take protective actions – develop proper money management, loss limits, adequate market understanding. And when he learns how not to lose his capital, it will be fair to talk about profits. The only group of traders that can be motivated by profits, is expert traders.
Only after you can learn to protect your capital, you can estimate the potential for profit (and it can vary upon market conditions, accepted risk and other parameters)
Proper question: How can I preserve my capital and survive the learning curve?
Bad question: Where will the price go?
Another question that is not very useful for trader – «Where will the price go?» (What to expect from the market). You know, many would like to know what will happen. But studies have shown that behavior of price can not be predicted accurately. Best traders are ok to have no more than 50% of winning trades (yet their profitable trades bring more than losing ones).
The game of prediction has nothing to do with real trading. It’s been proven by statistics that predictions have no correlations with real events in a long run. What about analysts? They have to create content every day, they can’t afford to issue one article a month or less (when they see really good opportunity). But trader has no such obligations. We can trade any time we want and we’d better choose the best of market can offer.
The best question you can ask is not «where the price will go», but rather «where is trade location with low initial risk for my trade?». Focusing on predicting makes you concentrate on something you can’t control. All we can control in trading is our risk. Tool for managing risks are: Market analysis, trade location (reasonable level for placing your stop) and money management. As you see, market analysis is not the most dominant part in this triad, it is just «one leg of a stool», no more.
It is important to have expectations about possible market movements, but it is more important to know your trade location – in other words, to know how exactly are you going to play this scenario.
Not being right is important, but earning more when you are right and losing less when you are wrong. It’s realistic. It’s achievable.
Proper question: How can I reduce risk in my trade and maximize return?
Nothing new about it, huh?
But it’s our human nature – we want to eliminate uncertainty, we want to know the future, therefore we focus on what we can’t control. Can we expect to have different statistics (70% traders or more lose their capitals entirely) having such beliefs?
But you can be different. You can be a winning trader.
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