A How-to Guide on How to Avoid Handicapping Your Own Trading Efforts

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A How-to Guide on How to Avoid Handicapping Your Own Trading Efforts

In trading, you can often become your own worst obstacle by usually the following three things:

1. Forcing trades and taking trades that aren’t there.
2. Trading too frequently and only semi-decent set-ups that don’t fulfill the criteria of factors you have set for yourself.
3. Investing too much money on any given trade.
4. Letting your emotions run amok due to the poor trading results that are derived from points 1-3.

Beginning traders often have all four going against them and this is why the results are almost always so uniformly terrible among this trading contingent. It’s like feeding yourself to the wolves. And all of this is certainly preventable if you maintain the discipline in order to avoid these errors and mistakes. If you can manage to do so, you will immediately put yourself in a very high percentile among all traders.

As we all know by this point, the fatality rate in trading is extremely high and it’s mostly because it’s so difficult to obtain the discipline required to follow a trading plan (your strategy and rules about entering a trade (and exiting in some forms of trading, like forex), your money management, when you trade, what timeframe(s), and so forth). Trading can be a very counterintuitive endeavor for the brain because we tend to become so emotionally involved in scenarios where the future in unknown. Obviously, it’s important to avoid this type of mindset, otherwise having long-term trading success is basically untenable.

The brain also has a difficult time with probabilities – which are basically what the trading game is all about, as nothing is ever a bonafide certainty. Even a weather forecast that asserts that there is a 30% chance of rain can become very misconstrued. Some people think that this means that it will rain for 30% of the time during the day, or if you step out into the outdoors ten times that day, it will probably be raining on three occasions. No, it simply means that there is a 30% chance that it will rain on that particular calendar day, or whatever the specified time period happens to be. But again, the human brain has a difficult time with the probabilities – that are also very inherent to trading – and much prefers to ascertain some type of concrete interpretation of things, even if it means missing the boat entirely.

Below is a list of ways on how to essentially avoid becoming your worst enemy when it comes to your trading. There’s the old sports analogy that says that winning is a habit, but so is losing. Following these rules as a matter of habit will easily put yourself in a tier clearly above that of the average trader, who unfortunately gets nothing out of his trading career.

1.Manage your risk

Focus on becoming a good trader rather than how much money you’re making. I never found it productive to constantly monitor my account balance. I just simply don’t even look at it. Focusing on becoming a good trader is what leads to eventual profits on a pretty consistent basis.

2. Dampen your expectations

Many people dream that trading will be the one thing that allows them to quit their 9-5 day job and get them on the right track to living a comfortable lifestyle for themselves. But the truth of the matter is that for most, trading will only be a part-time occupation. And even for those traders who do make trading their livelihood, it is often part of a company whose funds you trade with, while making a pretty standard working salary.

The ideation of tooling around in expensive sports cars, living in a gated community on the ocean in a warm-weather location, or whatever the perfect lifestyle might entail from trading your own money is fine to dream about. But things need to be kept in a realistic perspective. Because trading is a really tough profession to excel at. Make sure that you enjoy trading first of all and think of it almost like a hobby of sorts, and as a means of supplementing your income.

The truth is that with trading, whether you make money depends fully on the quality of your trading results. If things don’t go in your favor, which will happen, it often leads to drastic measures to rectify matters, which in turn leads to even worse results. It can be a scary way to live, not guaranteed a cent, unlike a standard job. Trading should initially be viewed as a way to hopefully supplement your regular salary if you are successful in some form, not to replace your job altogether.

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3. Stick to your strategy and trade what comes to you

Plan trades out ahead of time. If you receive the proper signals to enter a trade, take it. If not, stay out. Always specify a price ahead of time that you’d like to get in at. This helps in holding yourself accountable and avoiding the psychological issues of taking subpar set-ups or not being able to pull the trigger, which is another common issue.

4. Don’t use the “close early” feature that some platforms feature

Some brokers allow you to close a trade early. This is put in place as an option for traders at some brokers for the reason that if a trade looks like it’s going against you, or you’re winning a trade and would prefer to earn some profit, lest it come back against you and you get nothing. But you need to trust the set-ups that you take and stick by them if you’re trading with a solid strategy/system as you should be. More often than not, you will actually lose money. Even if a trade looks really against you, this early close-out feature will often be offering you just pennies anyway. Even if you’re at break-even so far, the feature won’t even return your initial investment. It’s slanted in favor of the house, to use gambling terms.

Plus, you really don’t know what the market will do. If you have a particular strategy or way of thinking about the markets that is net profitable overall – like the one I write about and demonstrate in my blog – then you do have an advantage over the market. It’s best to let trades transpire as you initially intended or else you are simply undermining your ability to win trades and make a profit.

5. Stick with a timeframe relevant to your trading

For binary options that provide 5-20 minute expiries, sticking with a five-minute chart is best. Every so often you may wish to look at what’s going on at a smaller time compression, but more or less, for expiry times in this range, you want to stick with a five-minute chart. If you trade one-hour expiries, a fifteen-minute chart might be best, for example.

6. The necessity of trading real money in some form

I do believe in demo accounts when starting out and to test trading strategies, but I do firmly believe that at some point investing real money is essential. As always, I recommend never investing more than 1% of the total amount you can afford to lose to your trading endeavors for the sake of avoiding huge ebbs and flows in the account balance and the resultant emotions that stem from them. And these are bad in both cases – greed and euphoria in cases of positive trading results and frustration and a desire to make back this lost profit when things aren’t going well. Emotions will rip apart a trading account like nothing else.

So while demo accounts do certainly have their place, you don’t experience the emotions that can come with trading real money. In a demo account, if you’re attempting to simulate a trading scenario involving real money and you incur poor trading results, you tend to have a carefree attitude and can be almost apathetic given there’s no money of your own at stake. I believe with demo accounts, you don’t truly simulate a live trading experience in this way and may not have the type of focus and standards toward your trading as you might when real money is at stake.

So my suggestion for all traders when starting out and believe they have a solid working strategy in place – which ideally will have been confirmed through some testing on a demo account first – is to trade small. I mean real small – $1 trades, $5 trades, whatever the size might be according to what you can afford to lose. For those who can realistically lose $500 to trading without truly affecting their financial situation, $5 trades are what I would recommend. Many brokers do allow you to invest amounts this small these days.

Often the biggest element mitigating what you can become as a trader is yourself. But as explained, there are ways around this reality. The key really boils down to having a solid trading strategy in place and keeping your money management formed around small investment sizes. This works greatly to reduce trading emotions and help you become the trader that you hope to become.

4 Ways Your Mind Is Tricking You Into Being a Losing Trader

Don’t think your psychology plays a role in your trading? Think again. Every day, we do thousands of things we don’t consciously control. This is a good thing most of the time, as we’d never get anything done if we had to actually think about taking each breath, walking, or moving our facial muscles to smile.

But the same auto-pilot programs that help us navigate the outside world harm us when it comes to trading. We can’t turn these programs off, but we can become aware of them and take steps to re-program ourselves.

Availability Bias

What you most readily recollect isn’t necessarily true, but your mind tends to think it is.

Research and thorough digging can usually route out inaccurate common knowledge, so all traders are advised to personally check facts and figures before proceeding to use such information.

What harms even more traders, though, are their own experiences. Say you read about a strategy online. Everything looks good, and so you start to use it. You lose five trades in a row. Your own experience now tells you this strategy is garbage. But is it? It could be, but you don’t actually know. Your mind has just tricked you into assuming it is.

The problem with personal experience is that it is the most readily available data source, yet almost always relies on small amounts of data. Be aware of small sample sizes. You don’t know whether something works until you test it thoroughly.

For a strategy, that means trading it for a couple of months or taking at least 100 trades. At least with 100 trades, you have some idea of how it actually performs.

Covid-19 Fears Shouldn’t Trash Your Zero Waste Efforts

This story originally appeared on Grist and is part of the Climate Desk collaboration.

It’s official: Your reusable mug has been tainted—with suspicion. Starbucks announced last Wednesday that it is “pausing the use of personal cups and ‘for here’ ware in our stores” due to the novel coronavirus outbreak, and Dunkin’ and Tim Hortons quickly followed suit.

That secondhand side-eye doesn’t just apply to coffee containers. Given the rapid, worldwide spread of Covid-19 — the severe respiratory disease caused by this new coronavirus—all manner of reuse habits that just a few months ago might have been considered environmentally virtuous now invoke the same kind of germaphobic fear response as a public coughing fit. Renting clothes so you don’t have to buy new ones that you’ll only wear once or twice? Rent the Runway updated its frequently asked questions last week to reassure concerned customers that “there is currently no evidence that Covid-19 can be transmitted from soft surfaces like fabric or carpet to humans.” Shopping with a reusable bag to avoid single-use plastics? A local news station in Buffalo ran a segment warning viewers to wash or disinfect their bags between each use, citing research showing that a completely different type of virus can be transmitted from reusable bags to other parts of a grocery store via shoppers’ hands.

Reusing goods and packaging as many times as possible, instead of disposing of them and then buying new ones, is one of the greenest practices there is. It prevents energy and resources from being spent on manufacturing and shipping new stuff. It diverts old stuff from landfills and oceans. These facts are at the heart of the so-called zero waste movement, which has spawned books, blogs, and package-free stores in recent years.

And there have been promising recent signs of a burgeoning “circular economy”—that is, a no- or low-waste system that encourages reuse rather than disposal. ThredUp, an online secondhand clothing store, grew from receiving 4 million clothing items for resale in 2020 to 21 million in 2020. In 2020, fast-casual chain Just Salad says it diverted 75,000 pounds of plastic from landfills with its $1 reusable bowls, which customers wash at home and then bring back to be filled with salad again. Last May, Terracycle launched Loop, an online store that sells groceries and household items in reusable packaging that shoppers return to Loop once they’re empty in exchange for a deposit.

But can the circular economy continue to grow during what some epidemiologists are already calling a pandemic? Reusable or secondhand items are unlikely to spread the novel coronavirus, as long as they’re washed or disinfected in between uses. But new items come with an aura of cleanliness, while reusable and secondhand goods often fight the perception of being unsanitary. The key to encouraging reuse at a time when coronavirus infection numbers are rising might be recognizing that neither stereotype is true.

“No disposable package is today sterile, just to be explicitly clear,” said Tom Szaky, the founder and CEO of TerraCycle in an interview with Grist. Different kinds of disposable packaging have different microbial limits set by independent standard-setting organizations—and unless a product is explicitly marked sterile, none of those limits are zero. That means a certain level of bacterial contamination is considered acceptable and inevitable.

Take a disposable plastic bottle, Szaky said. “That bottle is going to be moving through a bottle plant. It’s going to be put onto a pallet. That whole process is being touched and dust is being collected on it,” he said. “In no way should you take the message from me that a disposable package is dangerous … It’s just not surgically sterile and not even close.”

For Béa Johnson, the author of Zero Waste Home, one of the founding texts of the zero waste movement, the hygienic uncertainty in the supply chain is one reason she prefers a reusable water canteen to disposable water bottles. “With disposables, you have no idea who has touched it. With your own reusables, you do!” she wrote in an email to Grist. “Being afraid of reusables is as ridiculous as being afraid of Corona beer,” Johnson added.

So why do we tend to think of plastic packaging as being sanitary when it’s not? Szaky traces that idea to the 1950s, when the oil industry first introduced disposable plastic packaging and goods. “Disposability brought about unparalleled affordability and convenience. Moving from a plate you had to wash—probably by hand, because there weren’t even dishwashers then—to a disposable plate you could throw away was massively liberating and also very cheap,” Szaky told Grist. “And I think what ended up happening is people got this misperception that wrapping something in plastic also made it more sanitary.”

Loop’s circular model is aimed at doing away with the stereotype that packaging has to be disposable to be sanitary. Szaky emphasized that the process of rewashing Loop’s reusable packaging is “at the most sophisticated level washing can be.” The cleaning facility “looks like a silicon wafer factory,” he told Grist.

But Vineet Menachery, an assistant professor of microbiology at the University of Texas Medical Branch, says that level of sophistication isn’t necessary to prevent the spread of coronavirus. Depending on temperature and humidity, coronaviruses can survive on hard surfaces like steel or plastic for two to nine days—but only if you don’t do anything to stop them. “Relatively minor cleaning will actually dissolve or destroy the virus, and so if you use anything with between 60 and 70 percent ethanol, the virus will be destroyed in less than 60 seconds,” Menachery told Grist.

When it comes to reusable cups, mugs, and plates, plain old soap and water does the trick. “If you’re regularly cleaning stuff, you should be fine,” Menachery said. “My house, we have three kids, so we’re running the dishwasher all the time. I wouldn’t expect any virus to survive a dishwasher.”

As for secondhand or shared clothing—or cloth napkins—Menachery said people are unlikely to get Covid-19 from fabric because “if the surfaces absorb, it’s harder to transmit the virus.” But again, washing fabric with detergent and water will destroy the coronavirus.

I asked Menachery about the likelihood of contracting Covid-19 from a shared or secondhand object like a library book or a secondhand appliance from Craigslist. “A Clorox wipe or something like that would definitely dissolve the virus,” he said, though he added that those products might be hard to find right now. As for reusable shopping bags, Menachery said he’d used one himself at the grocery store recently. “I’d be less worried about my shopping and more worried about maybe the touch screen when you’re punching in your codes for the ATM or whatever,” he said.

In other words: Buying new rather than secondhand won’t protect you from Covid-19. You’re more likely to get coronavirus buying something new that got coughed on by the last person to walk down the aisle than from a secondhand item that’s been washed with soap and water or wiped down with sanitizing wipes.

The bottom line, Menachery said, is that the best way to avoid getting Covid-19 from an inanimate object—whether it’s new or used—is not to touch your eyes, nose, or mouth after you touch it. “The inanimate object could be coated,” he said. “And as long as you don’t bring it to the mucosal surface, it’s hard to get infected that way.”

Regardless of how long the coronavirus epidemic lasts, the problems of environmental degradation, climate change, and plastic pollution will still be with us when it ends. So Szaky says, don’t take coronavirus as a sign you need to give up your vintage clothing habit or avoid shopping at a package-free store. “That’s really important for the environment to do, and we shouldn’t suddenly forsake that because of all the fear around this particular issue,” said Szaky.

WIRED is providing free access to stories about public health and how to protect yourself during the coronavirus pandemic. Sign up for our Coronavirus Update newsletter for the latest updates, and subscribe to support our journalism.

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