A 100% Win Streak Doesn’t Exist. Just Win More Than You Lose
“It's not whether you’re right or wrong that’s important, it’s how much money you make when you’re right and how much you lose when you’re wrong.”
George SorosThis is one of the most popular quotes by George Soros, who is widely seen as the best trader of all time. His best trade was when he placed a massive short trade against the British pound and netted over $1 billion in profits.
That trade (we are talking about the 1992) almost broke the Bank of England (BoE).
Since then, Soros has accumulated billions of dollars in the market, giving him a net worth of over $6.7 billion. He has given away over $32 billion in funds to charity. Therefore, people listen when George Soros speaks.
In this article, we will look at this quote, which is one of the most popular ones in the financial industry.
Your goal is not to be 100% successful
In this quote, George Soros was talking about the realities of trading and investments. In it, he warned that traders and investors will always lose money in the market.
Besides, traders can't be 100% accurate. Well-known traders and investors, including George Soros, and Warren Buffett have had some weak performances over the years. By contrast, statistically the percentage of traders who lose money is more than 80 percent.
However, he cautioned that traders should ensure that they lose less amount of money (and also less times) than they win.
Any trader who manages to have more wins than losses will be a successful one in the long run. If we want to put it in simple words, your goal is to be a consistent trader.
Therefore, traders should incorporate several things to ensure that this happens, including trading strategy, risk management, and being in a good psychological state.
Having a good strategy
The first thing you need to do to ensure that you have a good day trading strategy. A strategy refers to the approach you will use to analyze your financial assets and implement trades.
Some of the most popular trading strategies to use are:
scalping swing trading algorithmic trading copy-trading.You should consider taking a few months coming up with a trading strategy and testing it with a demo account. At DTTW, we have our demo account, which is known as the Trading Mode Superb (TMS).
The demo has virtual cash, meaning that traders don’t expose their accounts to risk. When you have a good strategy, you increase the possibility of making more money than you lose.
In developing a good strategy, you should ensure that you have a good understanding of technical and fundamental analysis.
Technical analysis is the process where you look at chart patterns and incorporate technical indicators to determine whether an asset will continue rising or reverse.
The most popular technical indicators are moving averages, relative strength index, and the MACD.
Fundamental analysis, on the other hand, looks at the factors that have the ability to influence an asset’s valuation. In stocks, they include things like earnings and news. In forex trading fundamental data include earnings, inflation, and retail sales.
Adopt risk management strategies
The other thing to consider is having a good risk management strategy. Risk management is the process where you ensure that you lose less money than what you take.
There are several strategies that will help you achieve this, including:
position sizing having a stop-loss using a trailing stop for all your trades following the trendFurther, you should avoid over-trading, which will always increase the possibility of you losing money.
Also, you should think about correlations in the market. For example, buying ExxonMobil and Chevron could put you at risk if energy shares drop. The same is true with similar Exchange Traded Funds (ETFs) like those that track the S&P 500 and Nasdaq 100.
Trading psychology
The other thing that will help you avoid losing money is ensuring that you are at a good psychological state. In most periods, the main reason why many people lose money is related to their psychology.
For example, some people open trades right away after losing money in a bid to recover their losses. In other periods, a trader can attempt to open more trades after making several winning trades.
Key psychological traits to consider
There are several psychological traits you should always consider when day trading. These ones include:
Discipline
As a day trader, you should always focus on being disciplined. There are several things to consider in all this.
First, always stick to your trading strategy. At times, being under so much pressure could push you to change your strategy.
Second, always be disciplined enough to stick with your trading sizes. Further, you should always have a stop-loss and a take-profit.
Patience
Patience is an important part of day trading. There are several angles into this. First, you should be patient to wait for your strategy combination to work out.
For example, if you focus on indicators like VWAP and moving averages. In this case, you should be patient to watch for the indicators to flash buying or selling signs before you move.
Further, you should be patient to ensure that you don’t close your trades too early, especially when you are in a loss-making zone. It is common for traders to close their loss-making trades only for the chart to recover shortly afterwards.
Emotions
Always be in a good place to deal with your emotions. This means that you should not let your emotions guide your decisions in the market.
For example, opening trades when you are angry could push you to making substantial losses. Therefore, ensure that you are guarding emotions when you are opening your trades.
Summary
In this article, we have looked at an important quote by George Soros. In it, he argues that investors should focus on ensuring that their losses are significantly fewer than their profits.
He said that after recognizing that no single trader has a record of making profits in all periods. Even Ray Dalio’s all-weather strategy has not been profitable all the time.
