Fanaticism, Blurred reality and Risk Management

1. Most traders, bulls & bears alike (especially those on some of the speculative stock-forums on Twitter and StockTwits) seem fanatical and emotionally charged. When we are fanatical and frenzied, the reality gets blurred. It is always good to keep a watch on the market sentiment & respect the price action instead of simply trading our opinions.

2. Markets are much bigger than every one of us. They don’t care about what we “think”. Markets are always about “collective wisdom” at any particular point in time.

3. News and events (and nowadays silly tweets too) can alter market sentiments. But it is always a challenge because it is becoming increasingly difficult to find out what is real news as opposed to fake news.

4. One should never allow our emotions to come into play while trading stocks or investing in stocks. Love for a product should not be confused with love for a stock.

5. Stocks don’t need our love. In fact, our families need it, and they need us. Hence, don’t get married to a stock or a trade (long or short)

6. Keeping our positions small is a good practice. And NEVER going all-in is a better trade practice. And making sure we have a Stop Loss for all our trades is a great practice.

7. As traders, it is good to keep the number of our trades at manageable levels. No point in trading 30 stocks at a time if we can’t do justice to even 5.

8. Focusing on the RRRR (Right Risk:Reward Ratio) and Stop Loss management is more important than getting just the “right entries”.

9. Finally what makes some one a great trader is humility. If we are not humble, I bet the markets will eventually humble us.

Glad to share my 25+ years of experience in trading & investing. Comments and questions are welcome! Happy Trading!

About Venkat Pulakkad

Entrepreneur, management consultant, blogger & forecaster. Founder of Flourish Research Media that provides insights on markets, trading strategies & risk management. Currently an active trader with 20+ years of experience trading Forex, Stocks & Options. Areas of interest: Trend / Swing trading, Macro-tech analysis, building trading strategies, deploying Risk Management techniques, and helping / coaching traders to become successful traders. Twitter link: https://twitter.com/Flourish_Venkat

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