Welcome Guest! Home | The Problem | Log In
  The Nightraider Project

The Problem


The intra-day trading arena is a deceptive snake pit for the small, undercapitalized 'outsider' retail trader. That said, in my many years of experience struggling to extract and keep profits from the financial markets - whether day or night trading - I noted one constant that is a significant impediment to making clear, unbiased decisions for market entry and exit: emotions. Not surprising and no secret there. All trading organizations, trading room moderators and advisors know this and coach their clients accordingly. Some also mention under-capitalization. So the intensity of those emotions are dependent upon 1) the trader's available capital, and 2) how much of that capital is risked for a given trade. But they will also tell you that the most important factor determining profit probability for a given trade is the technical set-up. Ask 99% of day traders how well that has worked for them.

A mistake I've seen promoted by at least one other service is scaling into too many contracts against insufficient capital. For example, I have seen methodologies where the advisory service recommends scaling into a YM trade with 10 contracts – using a trading account with only $50,000! Let's say the market moves against the trader by 50 points – let's do the math:


A 1-point movement of the YM gains or loses $5

10 contracts X $5 = $50

50pts X $50 = $2,500 loss


This example assumes that the trader has set a 50-pt stop loss. A trader starting with $50,000 has now just lost 5% of their account, not an insignificant loss. Now imagine how the trader reacts emotionally to this loss if his/her account had a starting capitalization of only $10,000, and accordingly scales in with only 2 contracts. Now that trader has also lost 5% of their account, on one trade. If that same trader only funded their account with $5000, they've still lost 5% of their account if one contract was entered.



The Psychology of Loss

The difference between the under-capitalized traders and the one with $50,000 is clear when emotions are factored into this scenario, even taking into consideration that the same %age of money was lost. The under-capitalized trader is going to feel considerably more stress and worry over a drawdown or loss that turns a starting fund of $10,000 into $9,500. Or worse, a starting fund of $5,000 reducing to $4,750. It's the same %age loss, but the trader's perception is that the remaining balance is much more at risk of being drawn down further until there is a very real risk of blowing out the entire account. Of course the same can happen to the trader with the $50,000 account trading 10 contracts/trade. But that trader will likely feel much less stress over that since now she still has a relatively healthy amount of money left to trade another day ($47,500).

Next page: Our Solution



The Nightraider Project. Take it back.




DISCLAIMER SUMMARY: The financial markets are risky. Trading/investing is risky. This is not a solicitation, or an offer to buy or sell any security. Opinions are based on historical research and data believed reliable, but there is no guarantee that future results will be profitable. We are not advocating trading futures. This is not an endorsement or recommendation of the futures markets. The risk of loss in futures is substantial. You can lose more than your original investment. We are not Registered Investment Advisors or Commodity Trading Advisors. View our full Disclaimers, Terms and Conditions on our Legals page. View our Privacy Policy on our Privacy page.


Copyright SafeHome © 2019