Examples of opportunity loss

Suppose you have a situation where you take an entry signal only for the position to go nowhere, so you end up getting frustrated and close the trade. The next thing you know, the stock takes off in the direction you were attempting to trade, leaving you left on the sidelines. What have you lost? 

Some people would say that, as you haven't lost anything, you should simply move on and concentrate on what is happening in front of you now.

While I agree with the fact that you need to move on, I would  disagree with the point about not having lost anything - there is an opportunity loss incurred. 

The Golden Rule

I would be considered by many to be a loser at trading. This is on the basis that I have far more losing trades than winners. And, if that metric alone determined whether someone is profitable or not, then they would be right.

But fortunately, they are not. Because I use what Van Tharp calls 'The Golden Rule'. It has been around for more than 200 years. Trend followers swear by it. If you can use it, you can make money. What is it?

Don't just work on your method

Studies have been carried out proving that, even with a completely random entry, traders can make money by adhering to good risk control and cutting losing trades quickly. In his book Super Trader, Van Tharp talks about one such experiment with Market Wizard Tom Basso.

Yet, when you talk to inexperienced traders, nearly all of them continuously focus on some form of 'holy grail' to get them in right at the start of a price move - be it based on fundamentals, technicals or some thermo-nuclear indicator they have developed.

For 99% of traders, concentrating on the twin pillars of good risk and emotional control will help far more than continually fussing over how to get in a trade.

What is your definition of trading success?

I came across an interesting discussion recently about success in trading. If you go and look around you can find dozens of different definitions as to what is success, not only in trading, but also life in general.

And, as with most discussions, everyone will have their own opinion or belief about how you define success, and it will almost certainly differ from the opinions or beliefs of others.