|
I am happy I wrote Best Loser Wins, but I regret deeply that this chapter was not included in the book. If there ever is a second edition, it will be included.
I wrote Best Loser Wins because I wanted to tell a story about trading that I felt was missing from the trading world. My name is Tom Hougaard. I am a professional trader, meaning that I make my living from trading. I mostly day-trade, using high stakes – as compared to an average retail trader.
With high stakes comes additional emotional pressure, something that I have gradually gotten my mind accustomed to. It wasn’t always like this, and what you are about to read is the story behind the story. It all started two decades ago.
I placed my first trade 22 years ago. The Dow Jones Index had just reached an all-time high, and I went short. That short position would have been brilliant if it had been placed 3 months later. Instead, it turned into a margin call. Back in those days, your account could go into negative, and quite significantly so.
I deposited more money and I doubled up on my short position. Over the next week I watched the market like a mother watches her new-born baby. When the market fell, even temporarily, I was excited. When it rallied, I was in despair.
Eventually I could not stand the emotional pain anymore. I closed my open positions, and I mourned the loss with pitiful and pointless negative self-talk. The loss was significant. I was working for JP Morgan Chase at the time, in a non-trading related job, but I was earning good money. My trading loss equated to 2 months’ salary. I felt the pain.
Fast forward to the 14th of July 2022 – some two decades later. It is 3 minutes into the European trading session, and I short the FTSE 100 index. I run a Telegram channel that has 15,000 followers, and they receive my educational trade alerts within a nano-second of the trades being placed. I tell them what I do, and when I do it. I had just shorted the UK index at 7,155 with a stake size of £300 a point.
193 seconds later (everything is time-stamped to the second in Telegram), they receive another message, this time saying that I have shorted the FTSE once more (added to my winning trade), now at 7143.2. Then 4 minutes later they receive another message that states that I had shorted the FTSE for a third time, now at 7138.6.
By the time the market is 15 minutes into the European trading session I have shorted the FTSE 100 index 6 times, with a total stake size of £1,800 a point risk. Every short trade has been added at lower and lower prices, thus not violating a golden rule of mine never to add to a losing trade.
The next 20 minutes is a test of my resolve and patience. The German Dax index stages a come-back and it pulls the FTSE higher as well. The FTSE did start weak, as did the DAX index, but the next 4 bars, on my 5min chart, were relative bullish. Overall though the chart context was bearish. My stop loss on my entire position is 7,160. The FTSE went as high as 7,156. Then it began to fall - heavily.
As it fell, I added again and again, according to my plan. Over the course of the next 75 minutes, the FTSE fell from 7,156 to 7082. My open profit was more than £130,000. My followers in Telegram is sending me high-five emoticons and cheerful comments. It is a far cry from the trader I was two decades earlier.
What happened in those two decades? How did I transform myself from a trader who knew everything there was to know about technical analysis, but still didn’t make money, to a high-stake trader, who boldly engages with the market with high stakes?
Was it because I found a new hidden truth about technical analysis? The answer is a resounding “no”. You are not a losing trader because you don’t know enough about technical analysis or money management. If you want to trade or you already trade, then realise this: The house (the broker/the market) always wins. If you play long enough, and you never change the stake size, the house will win, unless when that perfect hand comes along, and you bet big, you take the house.
That “perfect hand” – that opportunity comes along every single day, many times a day, but unlike say a game of poker, where you know you have a good hand, in trading, a good trade only reveals itself slowly and gradually. And while you are never guaranteed a good hand in poker, you can be guaranteed that the market will give you good setups every day, if you have the right mindset.
How do you go from being a losing trader, who thinks he knows what he is doing, who knows a lot about technical analysis, who has read all the “bibles” of technical analysis, who says he has a system, to being a high-stake trader, who adds to winning trades, who sticks to the plan, who is not knocked off course because the market is moving against you? How do you transform yourself from a losing trader to a winning trader?
There is a saying that practice makes perfect. This is not true. If you practice the wrong thing, all you do is cementing the bad traits. You make the bad behaviour permanent. Practice does not make perfect. Practice makes permanent.
To continue to read the full story click here
| 
