Psychological Fixed Deposit. What is it? How to do it? and how it relates to one of Gann’s Rules.
There is a big number of traders who are swinging between successful and unsuccessful traders. Not that these traders don’t have the less knowledge. They have great knowledge and with the help of that knowledge they are able to earn good amount of money in Trading ,however with few loosing trades they sometimes loose their track. They sometimes don’t withdraw their profits from the market and instead they increase their position size. Even one loosing trade wipes out most of their previous profits and then face the dent in their confidence. They forget that they have won in the past and they start thinking that their is some flaw in the technical analysis and their methods. While, its just that is was a just a temporary bad time in which other big traders could have also lost the money.
“Money” here is where the issue comes. I am not talking about traditional money management that is required to manage the trading account. But I am trying to give a respective to handle the money from your trading account to the bank account. How you can you make the money fixed for each month in advance for many years, such that it gets matured each month and could serve as your Backup Capital.
One of the Gann’s rules was that when ever he had a big win in trading he divided into 10 equal parts. Now each trade he made was 1/10th of the big profit he had earned. Now by referring to this he also mentions that even if there are consecutive losses he will not loose out all his profits at one go, but in 10 different trades. After this he mentions, when he analysis his losses he is unable to find any time when he lost money 10 trades in a row. What Gann actually demonstrated was that how he made it impossible for his profits to run out and how at smaller levels managed it.
When u earn some big money in market or even if you do a normal withdrawal of your money from trading account make it fixed deposit. The maturity could be different months. So if you made 1,00,000. Divide it into 10 or 20 parts. Minimum amount for FD is 5,000. What this will do each month when a FD gets matured it will trigger n make u remember about your past trade n make u feel great about it. It will also make you remember about the strategy followed at that time.
You can again reinvest the FD once it get matured. Also you will obviously have multiple wins during the month, so suppose a big amount win is dated 3 Dec then all the FD maturing on 3rd will make u remember this trade. Another FD maturing on 10th n like this u will be able to surround yourself in a winning Psychology.
All of the ideas mentioned above require a lot of thinking in a silent and quiet place. Do spend some time in it.