The market often rewards bad behavior

By | December 25, 2014

The market often rewards bad behavior. You exit a stock because your stop is hit. You are okay with this because you followed your plan. The market then immediately reverses. You begin to think, “If only I stayed with the position.” The next time the market goes against you, you decide you are not going to get tricked again. This time though, the market does not reverse and what started out as a small manageable loss is now huge.

The market will give you loss after loss forcing you to abandon a methodology right before it takes off without you. On the flip side, the market will lull you into a false sense of confidence. You trade larger and larger, taking on excessive risk. You print money until your risks become so excessive that one or two bad trades wipe you out.

Learn from the market, but realize that sometimes it can be a lousy instructor.

 

The majority of unskilled investors stubbornly hold onto their losses when the losses are small and reasonable. They could get out cheaply, but being emotionally involved and human, they keep waiting and hoping until their loss gets much bigger and costs them dearly.”

William O’Neil

The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.”

Victor Sperandeo

Some people say, “I can’t sell that stock because I’d be taking a loss.” If the stock is below the price you paid for it, selling doesn’t give you a loss; you already have it.

William O’Neil

When I became a winner I went from ‘I figured it out, therefore it can’t be wrong’ to ‘I figured it out, but if I’m wrong, I’m getting the hell out, because I want to save my money and go on to the next trade.’”

Marty Schwartz

7 thoughts on “The market often rewards bad behavior

  1. Noble

    One of my favorite trading quotes by PTJ

    “You adapt, evolve, compete or die.”

    This quote summarizes this article.

    Bramesh ji do you agree ?

  2. SPIyengar

    Quotations are quite Good. .But quitting the positions is not quite easy.. managing emotions and limiting the damages are sure tips..Thanks..

  3. anand

    sir, i am one such victim of emotions umpteen number of times. i pray god better sense prevail on/in me

  4. dtskalai

    hai bramesh,,,,,, jan nifty future trading at 100 points premiun,,what does it mean,,,i never seen this kind of premium

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