Johnny Chan teaches trading

In the latest edition of Trader Monthly,  professional gambler Johnny Chan has written an interesting article about knowing when to walk away. Here are some quotes:

Early in my career, I used to have a problem with quitting when I was behind. It was very hard for me to leave a game a loser.  A lot of that was due to my competitive spirit. Far too many times, I’d lose way too much for one session. That’s a very bad habit for a number of reasons.

First, even though poker should be looked at as one long game, it’s much easier to motivate yourself after a loss if you have a good chance to make it up in the next session. A huge defeat reduces that likelihood. Also, the further behind you get, the more your opponents win. This affects your odds: Players who are losing usually play worse, while those who are winning play better. Frequently, when good players take big losses, one reason is that their level of play deteriorated as they fell further behind.

At one time or another, almost every top player is susceptible to losing more than he should during a session. This usually occurs when you’ve been playing a long time, taken too many bad beats and know you should quit. You’re tired, but your competitive nature keeps you at the table. And that can prove costly.

… There are a couple of lessons here: One, always make sure you’re trading with a clear head. If you’re tired or distracted, have the discipline to pull up and continue only when the odds are more favorable. Two, calculate your risk carefully and set loss limits, which enable you to maintain acceptable levels of exposure. That’s important all the time, but it’s especially crucial when you’re trading highly leveraged contracts such as forex or futures. Set reasonable risk levels, then stick to them — and you’ll always be able to stay in the game.

(I’m not a fan of Trader Monthly, but it’s free to subscribe so I give it a quick skim through each month.)

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3 responses to “Johnny Chan teaches trading

  1. Yes, all those articles on what watches to buy with our bonuses fascinate me too.

  2. I also read it on a monthly basis. They also just started e-mailing a daily “newsletter” to me. Mostly junk and occasional interesting article.

  3. I see people share a similar opinion on the magazine. I think it could have been really popular in the hedonistic 80’s. As it stands, I think it’s a just fun, coffee-table reading, for retail traders.

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