Why you should LOVE your losses 5 REASONSWe are brought up in society to WIN, WIN, WIN!
Throughout our upbringing we must either:
Achieve top grades
Drive the fanciest cars
Wear and own the best brands
In other words, we are raised to win with everything we do in life, until you get welcomed into the world of trading.
Today I’m going to be the contrarian and share with you why you should love, embrace and own your losses in order to ensure you grow your portfolio on a consistent basis.
Let’s start with:
What happens after a winning streak?
There will be a time during your trading career, where you’re going to endure a magical time where you end up taking sometimes 6, 8 to even 10 winning trades in a row.
Your portfolio will be smiling at a new all-time-high and, you’ll feel invincible. You may think that you’ve cracked the holy-grail of trading where you can quit your job and just make a living with the markets.
Research shows that individuals tend to invest and trade more actively when their most recent trading performance was successful. In fact, here are:
4 DANGEROUS Actions Traders Take During A Winning Streak:
They take on more trades.
They upper their trading positions.
They start to go against their trading strategy.
Their self-confidence and greed levels pick up.
Winning streaks are normal and INEVITABLE, but eventually they’ll end and the losing streak will begin.
No matter how good you believe you are as a trader or how perfect your trading execution skills are, there will be a time when the honey-moon phase for your trading strategy will be over and the markets will stop acting in your favour every time.
The reason is that due to the conditions of supply and demand, the markets environment will eventually change.
A market that was trending up or down, could enter into a 3-months sideways phase very easily. When this happens, you will enter into a drawdown (downside) phase.
The problem is not the downside for the next three months. The problem is how you’ll treat your trading going forward, based on the DANGEROUS actions you would have taken during your winning streak.
Let’s bring them back, to see what will happen to ‘invincible traders’ portfolios and minds with their unexpected losing streak…
They start to take on more trades –
THIS MEANS MORE LOSSES
They upper their trading positions –
THIS MEANS BIGGER LOSSES.
They start to go against their trading strategy –
THIS MEANS UNEXPECTED LOSSES.
Their self-confidence and greed levels pick up –
THIS MEANS DEPRESSION MAY KICK IN WHICH WILL LEAD TO QUITTING.
Now going back to what we said in the beginning.
When a winning streak ends, you should love, embrace and own your losses because of these five reasons.
5 Reasons To Love Your Trading Losses
Reason #1: Losses are part of your trading success journey
Once you have a winning and proven trading strategy, you’ll need to go back to your trading journal to remind you of the flow of winning streaks, losing streaks, average gain & loss per trade and other historical statistics.
I’ve back, forward and real-tested the MATI Trader System strategy for over two decades and so I know exactly what kind of winning and losing streaks are to come and that I’ll end up profitable in the medium to long term.
Reason #2: Losses help keep your emotions in check
Knowing there are inevitable losses to come, this should curb the ego, greed and fear emotions.
Reason #3: Losses should keep your risk low
With a losing streak that is inevitable to enter your trading results, this alone should be a reason to keep your losses low.
I personally never risk more than 2% or my portfolio in any one trade, no matter how many winning trades I take in a row. You can read more about the timeless money management rules in lesson three of the MATI Trader System programme.
Reason #4: Losses stop the “Hot Hand Fallacy”
Another reason that I love losses when trading is that it reminds me that the winning streak will come to an end.
This keeps me humbled and grounded to know that there will be a time where I’ll need to give back to the market, when the trading environment is less conducive to the trading strategy.
Reason #5: Losses don’t take me back to the drawing board
After a winning streak ends, you’ll find new traders will then quit trading and look for another system to find that will work for them during the changing market environment.
The thing is they don’t realise and accept that losses come with the trading territory and that one should never throw a profitable system away because a market enters into a drawdown phase.
Let me know what you thought about today's trading tutorial. I'm just sharing information I've learnt over the last 20 years as a trader.
Trade well, Live Free...
Timon
MATI Trader
Jse_top40
The rand is going up FINALLY! Target R15.92 - With confusion!Rounding Top (Scallop) has formed on the daily chart.
The price has broken below the neckline which signals bearish for USD
Also the moving averages are almost looking good.
21 > 7 >200 - Bearish
First target R15.92
The correlation between the Rand and the JSE stocks have somewhat reversed as of late. When stocks rise, the rand tends to strengthen and vice versa.
Now this makes sense in a way that a stronger rand means more buying power for consumers and more confidence in the economy.
However, we are a HIGH export country where we export in US dollars. As the heavy weightings of the JSE is with resources, we used to fall with a weakening US dollar.
Also, we tend to mirror the S&P500 and the DOw Jones as it's a leading indicator.
So the question we need to ask is... Is America signalling that we are in for massive downside again soon and this has just been a bull trap for us buyers.
OR is this the change in correlation where the JSE will continue up despite what happens in America and the US Dolla.
I Hope the latter.
Things aren't as they always seem.
Birdvest going to R258.13Cup and Handle has formed on the daily with Bidvest. The price has broken out and we are being a bit premature to go long, but the demand pressure is strong.
7>21>200MA Bullish signal
Target R258.13
Fundamentally, with the interest rate decision to pump up the market responded mostly positively for a short term view and this is probably because of the buying taking place from the positive fundamentals in America with a slow down rate with inflation, QE and interest rates.
We can only hope this bull run continues as we traders deserve it waiting all these months :D
CONCERNS:
The price has been moving in a solid sideways formation, which makes it a medium probability trade. I'll be only risking around 1.5% of my portfolio for this one.
5 Market entry Orders Easily ExplainedBack in the old days, to action a trade you only had two easy options.
Buy or sell…
Fast-forward into the present day, and today you get slapped with five different options to choose from when you get into a trade.
Right now, I’m going to simplify these five trading entry orders in way that you’ll never forget.
Entry Order #1: Market Order
The first entry order is the easiest to understand.
This is where you’ll buy or sell at the most current market price.
When you choose a market order, it is the quickest, most effective and easiest way to enter into your ‘long’ or ‘short’ trade at the current bid (buy) or offer (sell).
Entry Order #2: BUY Limit
When you place a ‘Buy Limit Order’, you’ll place your long trade entry price BELOW where the current price is trading at.
Once the market price drops on or below the Buy Limit Order price, you will be automatically entered into your ‘long’ trade.
EXAMPLE: BUY Limit
If BHP Billiton’s share price is currently trading at R305 per share and you would like to buy (go long) at R300 per share, you’ll choose the Buy Limit Order.
You’ll then wait for the market price to drop to your chosen order price or below it where you’ll then be automatically entered into your ‘long’ trade.
Entry Order #3: SELL Limit
When you place a ‘Sell Limit Order’, you’ll place your short trade entry price ABOVE where the current price is trading at.
Once the market price hits this entry point or above it, you will be automatically entered into your ‘short’ trade.
EXAMPLE: SELL Limit
If BHP Billiton’s share price is currently trading at R300 per share and you would like to sell (go short) at R305 per share, you’ll choose the Sell Limit Order.
You’ll then wait for the market price to rise to or above your chosen order price, where you’ll then be automatically entered into your ‘short’ trade.
Entry Order #4: BUY Stop
When you place a ‘Buy Stop Order’, you’ll place your long trade entry price ABOVE where the current price is trading at.
Once the market price hits this entry point or above it, you will be automatically entered into your ‘long’ trade.
EXAMPLE: BUY Stop
If BHP Billiton’s share price is currently trading at R300 per share and you would like to buy (go long) at R305 per share, you’ll choose the Buy Stop Order.
You’ll then wait for the market price to rise to or above your chosen order price, where you’ll then be automatically entered into your ‘long’ trade.
Entry Order #5: SELL Stop
When you place a ‘Sell Stop Order’, you’ll place your short trade entry price BELOW where the current price is trading at.
Once the market price drops on or below the Sell Stop Order price, you will be automatically entered into your ‘short’ trade.
EXAMPLE: SELL Stop
If BHP Billiton’s share price is currently trading at R305 per share and you would like to sell (go short) at R300 per share, you’ll choose the Sell Stop Order.
You’ll then wait for the market price to drop to your chosen order price or below it where you’ll then be automatically entered into your ‘short’ trade.
I hope this helps with knowing how to place an entry order for next time!
Trade well, live free...
Timon
MATI Trader
Sasol is continuing to tank further to R225.43Bear Rectangle is forming on Sasol as it previous did a few months ago. There are bearish signals as the downtrend is continuing.
The 200 > 21 >7 MA which once the price breaks below R277.95 we will have our next target at R225.43.
This confirms with the ongoing drop in oil price...
Coronation Fund showing a potential move to R41.58In the pipeline is seems Coronation is forming an Inverse Head And Shoulders pattern.
We seem the upside potential on the JSE based on the last analysis I did.
The first target will be to come down a bit, break above the neckline and then head to R41.58
JSE ALSI 40 ready to rock to 73,300The JSE ALSI 40 is finally showing strong upside since April 2022...
It's broken up and out of a box formation and is showing the first target to 73,300...
This is based on following the recent America's rally with the inflation rate coming down finally and dropping below the expectations. GDP is picking up and jobs have added over 261,000 jobs.
The leaders of the pack was Naspers, Anglo American, Sasol and Shoprite helping push up the JSE.
Bullish Bias...
City Lodge looking good for upside R5.00There has been a change in the wind for City Lodge.
A small but evident Cup and Handle has formed.
7>21MA
Price is still below 200MA which is a minor concern but with the JSE and ALSI picking up and establishing a somewhat bull market, this should send the price up,
Target 1 = R5.00
JSE still heading up despite FED 75 basis points hikeAs you can see as a position trader, we don't care about short term fluctuations with what happens with the FED, Employment numbers or Earnings.
We only care about what we see in the charts and where the markets are more likely to head.
The JSE ALSI 40 upside is still intact, and we are cautiously optimistic.
BULLISH BIAS
Barloworld - heading on top of the world!Barloworld has beautifully broken above the W Formation
Showing a ton of upside to come.
The 7 >21 MA bullish. The price is above the 200MA
CONCERNS:
The 200 is still above the 7 and 21 MA but I guess with a change in trend, we will see this no longer soon.
BULLISH
Mediclinic looking healthierMediclinic has just broken out of a somewhat Rounding bottom formation.
The demand and buying has kicked in which could send this price flying, once the support is retested and confirmed for upside.
CONCERNS:
The liquidity isn't great as the candles are quite large and erratic.
Bias - Bullish.
Ninety 1 W Pattern - Bullish R49.81W Formation has formed on the daily and price has broken up and out of it.
Moving Averages are almost perfect but still below 200MA..
Target 1 - R49.81
Bullish
With the JSE on the next upleg, we can expect a number of Top 40 companies on the index to rise in the next week or two.
ANH ready for flying fish to R1023.73W Formation on the daily has recently broken up and out of the neckline.
It then retested the support and bounced up, showing demand and buying is in play.
Moving Averages are almost perfect but price is still below 200MA...
Target R1023.73
With the JSE on the next up-leg, this could help boost the share price with this trade idea.
Standard Bank upside to come to R186.29Falling Wedge has established on Standard Bank.
Price has just broken above, but it's early days.
7>21 but 200 is still flirting with the previous Moving averages...
My first target is R186.29.
CONCERNS:
The JSE is mirroring the upside of the American markets (with the good earnings results) With the Dollar strengthening again, this bull run could be short lived and the market could crash below forming a fake out. I'll nevertheless take the trade and only risk 1% of my portfolio...
Choose your loss buy or sell We are currently in a very difficult trading environment for the JSE ALSI 40 (and the stocks in the index) and I believe world wide (with most markets).
This sideways movement has been going since July 2022...
The world is in a rut with major issues like high inflation, ongoing interest hikes, currency collapses, US dollar strength, UK economic collapse, East wars and COVID recovery.
Our hands are unfortunately tied, how long this will last and what the damage will be (drawdown wise). But we will control it with lowering our losses from 2% to 1.5%. This will all be guided through a process until we overcome it...
But it's part and parcel with trading and it's something that is very common on a yearly basis...
HOWEVER! This is crucial to understand as a trader.
Since the derivative markets, the algorithm of movement (between buying and selling) has changed drastically.
From the markets moving in strong trends (70% of the time) from 1940 - 2007 where a monkey could have thrown a dart and profited from any Blue Chip stock for 20 years.
To now we are seeing the markets trend around (20% of the time, if that) from 2007 -2022.
We have no choice but to make the stop loss and take profits prices tighter and to hold for less period of time.
This will be a patience game but will be worth it in the end.
Only those strong enough to stick around and act accordingly with their correct risk management will reap the rewards.
What are your thoughts?
Tigerbrands next run up to ATHLarge Tripple Bottom
There are also two Cup and Handles formed in the recent past.
Now that price has broken above both Brim levels it's looking bullish.
RSI> 50 and above the downtrend line.
Target R219.05
CONCERNS
Liquidity is low and it causes spikes in prices.
Such a large formation, can sizzle out the price move and it can continue sideways for the next few months.
We have our 7 week time stop loss so let's go.