How long will it take to turn $5,000 into $0?

This is a discussion on How long will it take to turn $5,000 into $0? within the Psychology, Risk & Money Management forums, part of the Methods category; I wrote an article called “How long will it take to turn $5,000 into $100,000?” which I've just followed up ...

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Old Feb 20, 2005, 11:56am   #1
 
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How long will it take to turn $5,000 into $0?

I wrote an article called “How long will it take to turn $5,000 into $100,000?” which I've just followed up with “How long will it take to turn $5,000 into $0?”

This second article was prompted by criticism of the first article and with hindsight I think that I agree with the critics that traders need to be warned about the risk of ruin more than they need to be tantalized with the prospects of enormous profits from trading.

Comments and cricisms welcome.
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Old Feb 20, 2005, 2:32pm   #2
Joined Nov 2003
How long will it take to turn $5,000 into $0?

Traders lose money for many of the same reasons. Many traders can’t (or don’t) take the small losses. They often stick with a loser until it really hurts, then take the loss. This is an undisciplined approach...a trader needs to develop and stick with a system.Many traders break a cardinal rule: “Cut losses short. Let profits run.”

Often traders have bad timing, and not enough capital to survive the shake out.Not following a disciplined trading program leads to accepting large losses and small profits. Many traders do not define offensive and defensive plans when an initial position is taken.After several profitable trades, many speculators become wild and un-conservative.

Many people trade with their hearts instead of their heads. For some traders, adversity (or success) distorts judgment. That’s why they should have a plan first, and stick to it.Emotion makes many traders hold a loser too long. Many traders don’t discipline themselves to take small losses and big gains.. Also, having too many trades on at one time and overtrading for the amount of capital involved can stem from greed.

Greed causes some traders to allow profits to dwindle into losses while HOPING for larger profits.This is really a lack of discipline. Greed, as evidenced by trying to pick tops or bottoms, is a frequent error.Often, traders jump into a market based on a story in the morning paper; the market many times has already discounted the information

They are not flexible enough to change their minds or opinions when the trend is clearly against their positions. They don’t have a good battle plan and the courage to stick to it..This is why traders turn $5000 in to $0

CJ

Last edited by cj12; Feb 20, 2005 at 2:50pm.
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