"Learning to trade has been a long journey – with soaring highs and aching lows. In moving forward – or in circles – I repeatedly knocked my face against the wall and ran my trading account into the ground. Each time I returned to a hospital job, put a stake together, read, thought, did more testing, and then starting trading again.

My trading slowly improved, but the breakthrough came when I realized that the key to winning was inside my head and not inside a computer. "

~ Dr Alexander Elder
Book: Trading For A Living

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"… people go wrong all the time. Instead of trading as they should today, based on their money now and their rules, they trade based on the money they once had. They are clearly trying to recoup. ‘How much money you used to have has no significance. It’s how much money you have now.’ " implored Eckhardt
(referring to William Eckhardt)

~ Michael W. Covel 
Author
Book: The Complete Turtle Trader
The Legend, the Lessons, the Results

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Folks who know me know that I always stress the importance of trading psychology, apart of capital and risk management.

One of the reason why trading turn out to be difficult for many people is that the tenet of cutting losses short and letting winners run is counter intuitive to how most people would think. When a new position is taken, and it not behaving correctly, one should close the position and get out as soon as possible, however, many people would choose to hold on to the position, hoping against hope that the position will improve so that they could get out at say, breakeven point. However, sometimes things can get out of hand and that is when an initial small loss starts to balloon to bigger and bigger loss if the position is not cut.

Conversely, many people tend to take small profit when it is made available to them. Well, there is a saying that says:”You can’t go broke taking a profit.” This statement, in my personal opinion, is very wrong. Yes, you could take profit, but no, definitely not at the first sight of seeing it. The whole idea is to let your profit runs as much as it could so that you maximise your return.

So, combining the two counter-intuitive trading approaches (to cut losses short and let winners run), you basically put together a trading plan that has a positive expectation which is important in any trading system.

Trade well.

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"In actual practice, an investor has to guard against many things, but most of all against himself."

~Jesse Livermore

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"Every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management.

These essentials are like three legs of a stool – remove one and the stool will fall, together with the person who sits on it. Losers try to build a stool with only one leg, or two at the most.

They usually focus exclusively on trading systems. Your trades must be based on clearly defined rules. You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound. You have to structure your money management so that no string of losses can kick you out of the game."

~Dr. Alexander Elder

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Trading Success = Winning Psychology x Effective Money Management x A Trading Plan with An Edge

How do these elements assist the trader? As traders, our psychological state,
or mental mind-set, can lead to consistent profitability; our money management
ability determines the size of our position and bet size; and our trading plan
delivers the edge, defining how and when the edge occurs.

~ Ray Barros
Book: The Nature of Trends:
Strategies and Concepts for Successful Investing and Trading

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"His money making style was about mammoth home runs and many small strikeouts. If there was a ‘secret’, he knew that you had to be able accept losses both psychologically and physiologically."

~ Michael W. Covel 
Author, The Complete Turtle Trader
The Legend, the Lessons, the Results
On
Richard Dennis’ Trading Style

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"I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell."

~Tom Basso

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