Book: A Complete Guide to Technical Tading Tactics by John L. Pearson

A great lesson that I have repeatedly failed to learn and re-learn as written by John as follows:

For those who do experience trading success, take money out of your trading account! Diversify your trading profits. One great analysis and trader, Fibonacci expert Joe Dinapolis, told me before going on the radio show that he likes to buy selected properties in real estatw, whether it is in Bangkok, Massachusetts, or Florida.

I have heard many a trader start out with $5,000 or $10,000, make a large sum trading a particular market move, and decide to just build their account. Quite frankly, I really do not remember any of those people acheiving that goal. I have seen traders give most, if not all and more, back to the markets. One reason is they become overconfident. They think, "If I can take $5,0000 to $30,000, maybe I can take $30,000 to $1 million!". Greed sets in, they trade larger positions, take on more risk, and forgot what got them their initial profits. If you are a one-lot or two-lot size trader, then take money out of the market on a consistent basis and reinvest elsewhere. Wealth creation is the goal, and diversification is the key to success in life.

Some Trading Thoughts

You only have three choices when you are in bad position, and it is not hard to figure out what to do: (1) Get out, (2) double up, or (3) spread it off. I have always found getting out to be the best of all three choices


No opinion on the market or you are doubtful about market direction? Then stay out. Remeber, when in doubt, stay out.


My reflection:

Last year, I have great success in doing choice (2) double up when in bad position as had done well when market recovered quickly. Last month, this choice has failed terribly, and wipe off most of the past year profit. The reason is overconfidence, and Greed sets in, I trade larger positions, take on more risk, and forgot what got my initial profits.

My great mistake is : Not knowing your market!. The market condition that causes the market fall is very different this time and Fed rate cut has lost its magical power and market could not recover.

I will re-learn these lessons:

1) Control risks
2) Put away some money

and move on. Cheers!