Maintaining anonymity for obvious reasons but this is my response to a trader who reached out regarding a large loss he recently took, so that is the context of where this begins:
I’ll need to have you around in order to have the most effect but I do still
want to give you some guidance since I know exactly where you are, and I'll
need some perspective on specifics when you get the chance to respond...but I
think I have some great advice I highly encourage you to consider applying as “unbreakables”
for yourself. at the least, ensure you consider some of it as part of you’re
entire plan on each and every play. I respect you reaching out to me and I’m
just looking to help you out, but assuming you know me, I don’t beat around the
bush since it won’t help you. no judging is involved but you need to consider
these things and face it head on in order to succeed through anything.
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- How much of the account was lost with this 1k loss? how much was
already down prior to this 1 play?? I know how this stuff can get so I don't
need specifics if you're not comfortable, but both you and I need to put some
perspective on this loss and what we'll need to do to get where we need to be
- I need to see the big picture, and you need to face it. without shame. I
know I have avoided discussing some of my big picture losses to my account
since it's real degrading seeing things in the big picture of things, whether
it be a constant downtrend of your account balance, or that you’ve taken huge
losses. must be faced.
- I need you to take some time to create strict, UNBREAKABLE rules for
yourself. you need to know when the you in the moment isn't really in control
anymore. You have to soberly decide when you MUST do something as one of your
Golden Rules. I am not chiding you, but you need to tell your subconscious
right now that it CANNOT do this again without consequences. it's like the
psychology of Pavlov's dogs. All negative actions MUST have consequences in
order to learn from them. Trust me, man. This is something you need
to do for yourself.
- Do it however you'd like, but to give you an idea of where to start: I
created a Golden Rules Manual for myself. In it I created rules I MUST
abide by, I created the max loss on each trade I can trade, max # trades in a
row I can lose, max cents I can lose per share, and so on. YOU MUST BE
CONTROLLED. --- it sounds crazy obvious, but we are no robots. Trade like a
robot.
We cannot take $1,000 losses unless our account is $25k or something. (and
to tell you truth, I’m just being generous, not even then...risk per trade
should realllly be around 1% of your portfolio.
Now, I am saying RISK, not CAPITAL per trade. There's a difference. The RISK
is what we can lose......ASSUMING WE ABIDE BY OUR UNBREAKABLE RULES....if we
refuse to listen to our pre-determined rules, then our CAPITAL per trade
becomes our RISK. --- AKA….we are here to make money
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I don’t want to take away from the genuine power of what I just said, so I
will leave it there and wait for you to get back to me when and if you're ready
to talk about it a bit. I can be very brief sometimes, but I felt a lesson like
this deserved the time to give you what I would've liked to hear when I had
taken some of these losses as I was getting on my feet....it needs to be said
and appreciated. and once you are able to do that, you will never ever
experience another $1,000 loss on a stock like LEDS again unless that $1,000 is
something so bearable for you to lose that you couldn't care less about the
play since you know that the trade fit your strategy and that the risk/reward
was fitting for the play and in relation to your capital size
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