Most traders stumble over their own legs. The more important it is to know your own limits! These must never be exceeded!
The statistics show that it is not that easy to earn money on the stock market. With the new regulations for the protection of investors, everyone can now ask his CFD broker of confidence how many customers have made profits in the last few months. The result is not surprising, but nevertheless shocking. 75-80 % of all traders lose money. Of course, this is not a new insight, but the question arises, why is this so?
In my opinion, a clear answer lies with the trader himself. I think it is essential to know your own limits within trading. I would bet that very few traders stumble upon a lack of expertise or strategies. Rather, it is their own personal limits that lead to losses.
Let us look at an important example in this context: risk. I think most traders have at some point in their career let off steam in a demo account. I would guess that the trading result was much better there than later in the real account. The only difference is the risk. What feels so easy in a demo account can turn into a real disaster in reality. Let’s not kid ourselves, the stock market certainly doesn’t have much to do with it. If you want to be successful, you have to jump in at the deep end and risk your capital. If it is very easy to lose 100, 200 or more euros in a trade in the demo account, things often look very different in reality. Not only do we lose in individual trades, but each trader must also survive a certain period of time of a drawdown. Even professional traders had to cope with sometimes severe account losses. A well-known example is Curtis Faith of the Turtle traders, who, according to his own statements, lost 75% of his account in the meantime.
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You will only survive such a drawdown if you do not exceed your own limits. As soon as this is the case, the subconscious takes control because you fall into panic, fear or a similar state. This rarely leads to success. Rather, it is a guarantee for burning enormous sums of money within a very short time.
PS: I am sure that Curtis Faith also found trading not easy during this time. But he had himself under control to such an extent that he did not act completely stupid. He may have come close to his limit, but apparently he didn’t cross it, because at the end of the year the account was back in the black.
Not only the risk is important!
The risk is of course always in the foreground with such considerations. The importance of it is simply too obvious. But you should take the time to think about your other limits as well. How many losing trades in a row can you cope with, regardless of how much money you lose? How long do you want to trade day/week? How long can you concentrate? How many strategies can you trade in parallel or more generally, how multitasking are you? What are your basic capital limits, i.e. how much money can you build up for positions?
Fathom the invisible limits
These are just a few examples that you should pay attention to in your trading. But my work as a trading coach showed even more. Often it is the less obvious limits that are often exceeded and then lead to disaster. I can only give you the tip to deal intensively with your trades. Ask yourself in the post-processing with everyone what you have felt, experienced and thought. Question your answers several times to get to the bottom of the actual problem. I am sure that at one point or another you will come up with an answer that will surprise you.