Video 51 A, B, C &D: Losing Because of Mistakes Flashcards
Three common ignorant beliefs that leas to losses:
- Perfect setups exist
- Noise exists. The market never moves randomly.
- Most of the time, either only bulls or bears can make money
True or False: Beginners are often wrong in picking entries, usually because they focus too much on risk and not enough probability on reward.
True
Being hopeful is a bad trait to have in trading. You have to objectively evaluate what’s going on.
If you rely on hope, I will lose money.
Remember that big bars after 10-20 bars in a trend is an exhaustion bar.
Define Trader’s Equation
Risk = Distance to Stop
Reward = Distance to profit target
Probability = The odds of making money before the stop is hit
All 3 have to work together to create a profit. Avoiding risk is not enough.
Once you become a success trader, life can be magical. Al has heard from many traders over the years who were losing money for protracted periods of time, and once they became successful, the amount of money was astonishing.
Al says, “Easier to make money trading tiny size, but using reasonable risk. Even if big.
Al says, “Low risk trading is a losing strategy.” Requires either perfect management or rare big wins, or winning 70% of the time.
Other choice for trader who wants tight stops is to take high probability trades.
Define Skunk Stop
In between two reasonable stops.
Al says, “When you trade small, you’re not going to get rich. However, you can practice doing the right thing, and once you get experience doing the right thing and you consistently do the right thing, you can trade bigger. Eventually, you will have a decent shot at becoming rich.”
