3 Ms & stages

霍爾果斯口岸

(奇摩原貼：2012/06/05)

操作者可以據此自我審視 & 評估自己在哪一階段, 相信絕大多數人都還停留在第一階段 ---- 找方法 (Method) 吧! 

by Dr Alexander Elder

Successful trading is based on 3 Ms – Mind, Method, Money. Mind refers to your trading psychology. You must follow certain psychological rules that lead to winning when faithfully applied and avoid pitfalls that become death traps for most losers. Method refers to how you find your trades – how you decide what to buy or sell. Each trader needs a method for choosing specific stocks, options, or futures as well as rules for “pulling the trigger” – deciding exactly when to buy and sell. Money refers to how you manage your trading capital. You may have a brilliant trading system, but if your Money Management is poor, you are guaranteed to lose money. A single unlucky trade can destroy your account if Money Management is not in place.

Traders go through three stages of development. When people first
approach the markets, they usually focus on the method. Most of them do not survive this stage. They are too inexperienced and do not have anyone who can tell them how to stay out of trouble. No amount of optimized moving averages or fine-tuned trendlines will keep them alive in the markets.

Those who survive that stage acquire a greater sense of confidence. They acquire a method of selecting what to trade and the tools for analyzing markets and deciding when to buy or sell. Some become quite proficient in technical analysis, market indicators and systems, using computers to search on-line databases. Then the smarter survivors start asking themselves: if I am so good, how come I am making so little money? How come my account is up 20 percent one month, and down 20 percent or worse the next month? I clearly know something about the markets – why can’t I hold on to what I make?

Traders at the second stage tend to grab profits and buy something before their money evaporates in a series of bad trades. Then one day they look in a mirror and realize that the biggest obstacle to winning is the person they see in it. Impulsive and undisciplined trades with no protective stops lead to losses. A trader who survives the second stage comes to recognize that his or her personality, with all its complexes, quirks, and faults is just as much a trading tool as the computer.

Traders who survived that stage become more relaxed, quieter, not
jumpy in the markets. They are now in the third stage – focusing on managing money in their trading accounts. Their trading system is in place, they are at peace with themselves, and they spend more and more time thinking how to allocate their trading capital in order to reduce overall risks.