Covering unavoidable defeat with margin trading
Trading carries an element of randomness. There is randomness in anything, but it is reasonable to think that randomness plays a fairly large role in trading.
When you buy stocks for the first time, it can happen that the stock you happened to choose soars dramatically.
There is no rule that says, “Because you’re a beginner, you must forcibly exit at a 50-yen range.”
Whether beginner or veteran, even seasoned professionals, everyone trades with an element of chance.
Therefore, for each trade, winning and losing are both natural outcomes.
Even if you analyze carefully and cautiously and think you have judged calmly that “it has fallen enough. The decline has clearly stopped,” it is possible that it does not go down as expected.
This fact is the backdrop to why many pros claim that a win rate around 50% is just right for trading systems. Instead of forcing a correct guess, you should aim to limit the downside (and not take too much time) while increasing the upside (even if it takes time).
As long as over a certain period, for example six months or one year, the cumulative result does not become heavily negative, it is fair to say that “the method is not wrong.”
Even with a string of losses, if individual losses are small, your funds remain sufficiently preserved. There is no need to reduce the number of shares just because funds have decreased.
Then, when you encounter a situation where you “fit well” with the market, you not only have enough funds left, but also enough mental margin. This allows you to earn profits more easily.
anticipation is inevitable, so act without dithering and keep losses small.
In the face of extreme losing streaks, you might think, “Is there something wrong with my method?” However, by sticking to an appropriate capital utilization rate according to your trading method, your funds will not suddenly drop by 30% or 40%.
If you survive without a drastic decline in funds and stay in the market, opportunities will come around. To avoid missing those opportunities, disciplined trading is essential.
While actively imagining gains, it is important to restrain activity by considering the worst-case scenario.
I mentioned “chance,” but many investors think too much that they absolutely must not miss a profit opportunity. Thinking “even one miss is terrible” leads to excessive trade frequency, increasing the risk of losses and causing confusion.
If you are overly sensitive to each trade’s outcome, your response to misjudgments becomes lax.
If you think “losing is impossible,” your response becomes delayed.
Even if you feel “this is bad…,” you ignore it and the losses grow. Moreover, you end up spending a lot of time on it.
Financial and time losses, a double hit. Combined with mental damage, you suffer triple or even unlimited negative consequences.
If you limit yourself to your ideal pattern, you can reasonably expect your win rate to rise.
However, the increase in win rate is modest, and you cannot eliminate individual misjudgments.
Reducing activity without fearing the result of “missing profit” yields a large effect.
Because you stop thinking, “I can’t miss even a small opportunity,” you become able to calmly consider price movements and your own potential.
Stock prices occasionally show sudden fluctuations.
But imagine the ideal state of “having the right timing” as your model.
Missed profits are inevitable.
Yet, by using an “ideal image” and riding the waves, you can sometimes take large profits.
Whatever method you use, if it is established as a legitimate technique, you can end up profitable by repeatedly taking and giving, while ultimately remaining positive.
However, if the gears of your response slip, you can incur painful failures.
Accept unavoidable losses as “expenses,” and maintain a posture of waiting for the next opportunities.
■ Stock Investment [Tiger’s Den] (Lin Investment Research Institute Channel)
On Wednesday, February 2, I uploaded the latest video.
Foundational knowledge and basic techniques to make a profit
[Hard-to-hear Talk] Holding a Loss Position and Waiting to See
Watching the stock price, checking your position, and thinking about the future while predicting—when this happens, do you often mutter, “I’ll just wait and see” because you can’t think of what to do?
■ YouTube Channel Market Scramble
I uploaded past videos to Market Scramble.
You can view them at the following URL.
× ![]()
