is some advice as to how market participants can make the best of any
situation and increase
Profits developing reluctantly need not be a sign of an imminent loss.
Similarly, losses arising slowly
are not a sign of an imminent profit.
+ The longer the forecast
period, the less reliable the forecast, as the probability that new events
may arise after the position has been entered, increases with time.
+ Look for information,
which runs counter to your commitment. At the same time, question information
that confirms your original decision. Traders and investors tend to overvalue
information that agrees with their own ideas. There is also a tendency
to suppress, even ignore, information that does not fit one’s personal
image of the world.
+ News that is easily accessible
for you is usually also easily accessible for other actors. There is
every likelihood that the news is already reflected in the market price.
+ Do not respond to every
bit of news you hear. Keep your eye on the big picture, on the basis of
which you have to make your decision.
+ Assume that analysts set
most forecast bands too narrowly. Compare actual bands on the basis
of historic price data for a currency, stock etc. over a specific period
in order to arrive at more realistic values.
+ Similar analyses from
several sources increase the confidence that the forecast is right. Assume
that opinions have usually been compared. A stock that is recommended
ten times over is not necessarily ten times as good as a stock that is
recommended only once.
+ If the majority of market
participants expresses a unanimous opinion, then they will normally not
find enough opponents to realize the resulting profits.
+ Determine a price target
and a stop loss before each trade. Make sure that the target profit is
approximately three times as large as the amount that you are prepared
to risk. Do not set the stop
loss too low: give the market some space to breathe.
+ Keep your trading volume
as constant as possible. The trading volume must on no account be increased
on the basis of a series of successes, nor should it be reduced by a large
amount after a negative series.
+ Never liquidate a position
because you are loosing patience or becoming increasingly fearful while
waiting for a profit.
+ Do not waste time on unprofitable
positions because this will lock up your money, which you then cannot
use for other, more profitable transactions.
+ Do not underestimate any
possible foreign currency risk accompanying trading and foreign
+ Remember that there are
no friends in the financial markets. There is only the short-term community
with shared solidarity of those who collectively will not admit a loss.