When things aren’t going right, DON’T PUSH DON’T PRESS – RICHARD DENNIS
Richard J. Dennis, a commodities speculator once known as the “Prince of the Pit,” was born in Chicago, in January, 1949. In the early 1970s, he borrowed $1,600 and reportedly made $200 million in about ten years – Wikipedia
Nobody likes to lose
Those who trade regularly will be aware that no matter how awesome your analysis is, and how perfect your entry is, invariably you will hit a losing streak or get stopped out in a couple of trades. And, if you are not managing the risk on your entries properly, the loss can make a huge impact not only on your pocket but also on your psyche. Obviously, we don’t like to lose and for most of us, the first emotion that a loss brings is ANGER.
Fighting the market
How does an angry trader deal with the loss? Now, we have all been there, and recalling from my past I can confidently say that I would just not give up. I would fight the market. One sure shot losing technique of fighting the market is to take a new position in the same direction as before and not using a stop loss. If there is no stop loss, you can’t really lose. Can you? This is what I thought until I realized that you can still lose. And, lose that trade and all the capital in the account too.
Let’s say you are smarter with experience now and you obviously know better than to trade without stop loss or without managing risk but the losing trades are making you frustrated and you decide to put an end to this nonsense!
How do we recover the money lost by getting stopped out from a LONG position?
By going Short! Immediately! Isn’t it obvious that if the buying is not working out, we should be on the selling side?
Well, that’s what I thought, and it turns out I was selling at Support all the time!
For those who do not understand what support means: it’s a price level where buyers jump into the market. Another sure shot way to lose more money! And all I wanted was to recover my loss for the day!
You cannot win without losing
Looking back, I know that I could have never been profitable as a trader unless I made those mistakes. Unless I was okay with losing. Until the loss doesn’t bother me psychologically. If the risk on a trade is managed well, being stopped out on a trade is just like a marketing or a sales expense in a business. You can’t avoid it.
Doing Nothing: The Secret Strategy
The best technique to deal with a losing streak is to simply take a step back and clear your mind. Just take a break. May be get a beer or find a quiet place and meditate. Look at the losses from a third person’s perspective. The money is already lost. Try to understand the mistake and what could have been avoided and if nothing could have been done better, there is nothing to fix anyway.
While trading, the only way of avoiding disaster is to actually DO NOTHING to recover the loss. Just get busy with something entirely different and come back to the game once your mind is clear.
That’s my perspective on the quote by Richard Dennis: DON’T PUSH DON’T PRESS. And coming from someone who made $200 Million out of $1600, I take his advice VERY SERIOUSLY.