March 6, 2023

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Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.

This quote by Warren Buffet emphasizes the idea that predictions are often based on the biases and assumptions of the person making the prediction, rather than on any objective assessment of the future.

In short, one reason why the future is unknown is because of the complexity of the systems and processes that shape our world. The interactions between people, economies, governments, and natural systems are highly interconnected and subject to a wide range of influences and feedback loops. As a result, even small changes in one area can have ripple effects that are difficult to predict.

Buffet's point is that relying too heavily on forecasts can be a mistake, because they can create a false sense of certainty and lead to overconfidence in one's ability to predict the future. Instead, he advocates an approach to the market that is based on humility and prudence.



A Trader Is A Professional Loss-Taker

Professional loss-takers. That’s what good traders are—professional loss-takers. And that’s why they win!
Losses are part and parcel of trading. It can’t be said enough! No matter how much you try to predict the market or analyze the charts, there will always be some uncertainty involved. It’s like sailing in the open sea—sailors can prepare and plan as much as they want, but mother nature can always surprise them.
But here’s the thing: losses are not necessarily bad. Again, they are just a natural part of the trading process. We can’t win every trade, and that’s okay. In fact, it’s more than okay—it’s necessary for our growth as traders.
Think of losses as the storms sailors inevitably encounter. Those storms may slow the sailors down or even throw them off course for a while, but they also teach them valuable lessons. Every sailor worth their salt has gone through storms. As a result, they’re grown from their experiences and have developed the confidence and poise needed to successfully navigate the seas.
It’s the same thing in trading. Losses are like storms—they’re inevitable! And one of the most important mental skills we can develop as traders is the ability to identify bad trades and cut them quickly. In other words, you’re not working it up in your mind; you’re not holding on to the hope that the trade will recover, you’re just taking the L and moving on to the next trade, presto!
You have got to embrace those controlled losses before they devolve into account- and confidence-decimating nightmares. Be patient with good trades and extremely impatient with bad trades.
Astute risk management is the name of the game.
– Bad trade? Take the L and move on.
– Trading error? Learn your lesson and move on.
This is how you win as a trader!
By cutting your losses quickly, you free up mental and financial resources that can be used for good trades.
And the same skill of cutting losses and letting go applies to our personal lives as well. Just like in trading, in life, you are bound to encounter bad outcomes. So, ideally, this skill of cutting losses and letting go needs to be turned into a life habit.
– Mindless hater/naysayer? Block them and move on.
– Toxic relationships? Get out of it and move on.
– Poor lifestyle choices? Acknowledge it, see what needs to be changed, and then do it. Move on!
Don’t waste any time or mental energy on things that aren’t conducive to success and happiness. In fact, don’t allow them to occupy any mental real estate at all. Take the L, be swift about it, and just keep moving! I urge you to develop this habit now.

Hope you enjoyed this preview of the Trading Composure Newsletter.

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