I have seen many traders blow up trading accounts simply because they refuse to accept they are wrong. They are convinced in their own mind that due to their research and back testing that their strong opinion will be right.

Trading is a funny game and often goes against the grain of human thinking. Generally speaking if you study something long enough and research it using the latest techniques and professional tools available you have a good chance of being right. This is the very type of mindset thinking that people bring into the trading arena and lose.

A few years ago I knew a trader who lost over $50,000 in 3 hours trading futures and dinted his confidence in a big way.  He  employed a friend  who he’d worked with who is an incredibly bright guy. He had previously designed extremely sophisticated town planning systems throughout the world. A very bright guy indeed. The trader that had lost the money said to me one day that his opinion was that his mate had the perfect skills and technical ability to develop a system to get all the money back he’d lost. It was at a relatively early stage in my trading career and I didn’t know much better but all I kept thinking was, I hope he shares it with me if it works.   Needless to say it didn’t, but the talent assembled to research and put together a trading system that showed incredible returns when back tested never materialised when traded live.  Their opinion was wrong. » Continue Reading »