How to prevent yourself from losing

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We do have some natural biases. Some things we see different, but in fact they are exactly the same. Why do some traders continue to lose? And some traders continue to win on a steady base?

How to become a ‘steady-win-trader’ ?

Many traders do loose. Therefore a percentage of traders win serieus money.
This has nothing to do with the strategy or Signal Provider you are receiving signals from.
Trading successfully, depends on many elements including but not limited to the SP’s trading methodology. The investors trading psychology is also very important.

Loss and Win frames (the framing effect)

An example of a Win-frame:

A large manufacturer has 3 factories with 6000 employees. Due to the crisis, if nothing is done all 6000 people will be out on the street. The company sees two options:

A Save one of the plants, with 2000 jobs.
B 1/3 chance of saving all 3 plants and 6000 jobs, 2/3 chance of saving nothing.

80% of the people chooses Plan A!

An example of a Loss-frame:

A large manufacturer has 3 factories with 6000 employees. Due to the crisis, if nothing is done all 6000 people will be out on the street. The company sees two options:

A Results in the loss of two plants, and 4000 jobs.
B 2/3 chance of losing all 3 plants and 6000 jobs, 1/3 chance of losing no plants and jobs.

80% of the people chooses Plan B!

But why?

Framing impacts people because individuals perceive losses and gains differently. The value function, (founded in prospect theory) illustrates an important underlying factor to the framing effect: a loss is more devastating than the equivalent gain is gratifying. Illustrated in the sample above, we become more risk-seeking in the loss frame. (ooopss!) We think we have to put more money on the table (to increase our lots size) to make up our loss. Intentions we previously made to trade safely are perceived differently. We lost some money! We want it back! Therefore we want to increase our risk. (too much risk)
We will lose more! We want all money back! Today! …

Another example: Our Signal Provider goes – 4%. (a completely normal fluctuation)
Drawdowns will occur! We didn’t stick to the plan of building up our lots size first 2 months,
but went in with the total lots amount at once. We face a loss of minus 4%. Stress and guilt
feelings start to dominate our overall thinking. You want to try a different SP.
Because this Signal Provider made a loss! It’s his fault! Bad, bad SP!

So we will chose a new Signal provider. Then the new SP goes –7% after a week.
We want to switch again… The original SP made up his loss and is up +2%. (because he wins after all). We want to try the original SP again… (but the original SP goes –4% again…)

How to prevent yourself doing this:

Focus on risk instead of gains!

Try to imagine how you feel in a loss situation of -3% (first month)
Do you still feel relaxed…? (checking the system next day?)
Your absolute stop on zulu is -6% (-600 pips),
so there is nothing to worry about right?

First half a year you gained 19%. Now you are trading with 0.3 mini lots / $1000.
Try to imagine how you feel in a loss situation of -7% after gaining 19%.
(almost half of the profit is %#$^ed up)
Your absolute stop on zulu is -20%, (-600 pips)
so there is nothing to worry about right?

Do not overtrade! Never! Absolutely Never!

We cannot control the sea. We can only control ourselves.
Stick to your original plan of building up your lots size.
(and the risk approach you wanted to use at the beginning)
If you perceive any greedy feelings (dollar signs in your eyes). Stop trading immediately!
If you perceive any guilt or stress feelings (checking the system every hour).
Stop trading immediately! Take a pauze. If you can’t stick to a safe lots size. You do not feel relaxed? Stop trading! Not everyone is suited for investing. Self control, discipline, patience, a stable personality, (rational instead of emotional), ego and pride (do not think you can influence the market, the market will listen at the end) Trading takes a lot of time and patience. Months, even years. Not days! A skilled sailor knows the ocean needs to be respected. Even in stormy weather, the sailor is confident of navigating his ship into the harbor without any damage.

Consider this following analogy:

Why do people drown when the human body automatically floats?

I was taking a bath today and I realized that most of my body automatically floats without any effort. I noticed this before, but I was reminded of it tonight. I also noticed when I would go swimming in the ocean or in a pool… my body would automatically float without me doing anything.

The truth is everyone can float so you are right when you say that all you have to do is relax but some people get scared while swimming because they cant feel their feet on firm land so they freakout and tend to wave around frantically so their bodies arent relaxing and they cant float.

Saying this as the founder of pipship…

More important notifications:

  • I can not emphasize enough the importance of responsible moneymanagement.

There is no need for taking too much risk / not scaling up the lotssize ratio / not using an absolute stop!

  • Please be carefull when using other SP’s in your trading portfolio.

I know some other zulutrade strategies look very profitable. I’m not saying this to become a monopolist. Most SP’s trading at zulu are amateurs because SP’s are not compensated enough. Professional SP’s are only trading large company funds (and earning acceptable fees). It’s not in their interest of providing signals to small accounts of retail traders. My biggest motivation to send signals to retail traders is because I have seen too many SP-accounts going down (and taking out the accounts of followers with them) because of amateur programming, changing the strategy (mistake in code causing a blow up of SP-account) amateur ways of controlling drawdowns and lying to followers: ‘I’m experienced, thank you for trust, be patient, sorry bad market conditions (they actually do not exist) tough month… next time I will correct… Best traders do have bad… weeks, months, years?.

  • Please avoid any greedy self invented moneymanagement strategies. Something in your mind is saying.. euhm helloew… this could end pretty nasty.. The other part of you is seeing loads of dollars…

Greed is part of human nature. (and especially a part of man) The whole crisis is about greed, egotism and self-interest. When trading forex, we are in danger of destroying ourselves by our greed and stupidity. You are here because of greed! Otherwise this website was not important at all. Try to control your greed. Maybe the most important rule to trade succesfully.

  • Please do not interfere in managing positions of the system yourself.

If you feel any need for experimenting, please experiment with a demo account. Some people are deep down inside not really looking for steady consistent returns. They are looking for action! (1) (2)

Only by increasing your deposit to a reasonal amount of equity we start to be compensated substantially for the investments we already made for PipShip. We earn about 3% (0.5 / pips avg trade x 100) of the profit. Managed accounts are typically charged with performance fees of 20% in addition to the base management fee. PipShip earns by making money itself, trading it’s own account. So there is only a negligible interest in providing PipShip’s Signals to the public. For now, traders can take advantage of the analysis services of PipShip for GBPJPY.