I will share with you the experience of three bright colleagues who worked as professional traders for a major insurance fund.
All three were extremely successful trading at their company. They had a stellar trading record for over ten years; they were in fact the company’s top three traders. Tired of office politics and the company’s meager salaries compared to the profits that they were generating for the company, they got together and decided to leave the company and to trade for themselves.
They pooled their own personal capital funds, rented and furnished a beautiful new office and started their own private trading fund. Confident and proud they began their venture with great hopes and even greater expectations. After all, unlike the amateurs out there, they actually had a proven track record of success.
Unfortunately, one year later, their venture had lost over one half of their capital and they were at each other’s throats. Each blaming the others for the losses. Their venture failed and each of them is now working for a different company.
It’s one thing to trade with someone else’s money and it is another to trade with your own. No one should ever trade with money they cannot afford to lose or trade because they need money to meet current expenses. Naturally, no one trades to lose money but if you are trading for income and you start to lose your own hard earned capital, your fear and emotions will dramatically influence your trading decisions.
We are all humans, as human beings, whether we like it or not we have emotions. More often than not, our emotions control us in a powerful way. This is why in recent years more and more professional trading activity is being turned over to machines. Computer algorithms now control the decision making process to completely eliminate any human emotions from the process. The most profitable traders in the market today are high frequency traders. These high frequency traders simply rely on algorithms that read order flow and react at lightning speed. Some of these high frequency trading firms make tens of millions of dollars in the market each day. They rarely have a losing week or month.
However, these types of profits are not available to the small individual trader. New traders and beginners need to have realistic expectations about the market. First of all they need to realize that learning to trade through a trial and error is the most expensive way to learn to trade and usually the fastest way to losing your precious capital.So always have a mentor who have gone through the hard knocks of market, and can guide you.