Archives of “January 7, 2019” day

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DISCIPLINE IN TRADING

  
  Education
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Discipline: “Habit of Obedience”

 Have a trading plan or system is essential to the exercise of good discipline, as it normally imposes certain parameters and sets out certain criteria which dictate how trading decisions should me made and what needs to be done in certain situations. Habitually following your plan is what is meant by the exercise of good trading discipline, which, in turn, will help you realize the best expected results possible from your plan. If you find that your trading plan or system is not meeting your expectations, despite habitually following it for a reasonable period of time, good discipline requires that you be prepared to review it and make any adjustments or fine tuning necessary for future use.

 Lack of Discipline

Day traders who suffer from lack of discipline often allow their emotions to rule their trading decisions, which often leads to bad decisions and unacceptable trading losses. Never allow your emotions to rule your trading. In order to trade successfully, you must develop a trading plan. (more…)

5 Unique Rules of Trading

  
  Education

 

1. They plan every single trade. EVERY SINGLE ONE.

Every trader I’ve talked with that makes money consistently knows the following about every single trade they take before they even begin entering a limit order into their trading platform:

a) the highest price they are willing to pay (if they are going long) or the lowest price at which they are willing to sell (if they are going short)
b) their profit target where they will exit if they are “right”
c) their stop loss where they will exit if they are “wrong”
d) the risk/reward ratio of the trade
e) the exact percentage of their account they are risking

Lots of traders do one or two of these things. Few do all of them. In simple terms they know exactly what they want to pay, how much money they anticipate making (or losing) and a very clear idea on the probability of the trade working out.

Although you might think that every great trader uses hard stops that are pre-programmed in, many don’t . However, they are highly disciplined and when their stop loss number comes up they are out. Most traders don’t have that type of hard-core discipline and so a hard stop loss is still their best option.

2. They stopped trying to pick tops and bottoms years ago

Nearly all of the classes, courses and webinars you’ll find on the Internet talk about using support and resistance of some type to find where a market is turning and how to get in before or while it does.

The funny thing is that only a very few successful traders I have ever talked to trade that way. Simply put, 95% of the traders out there that make money are buying higher highs and selling lower lows. They do the exact opposite of nearly everyone out there because they found out long ago that picking tops and bottoms is a sucker’s bet. One trader described it to me by saying that it’s much easier to just participate in what a market is already doing than trying to guess when that behavior will change. Flip-flop your strategy to agree with what the market is doing rather than guessing on when it will change its mind, and you’ll be in a much better position to make money trading.

3. They are patient with winners – and ridiculously impatient with losers.

Most traders have a great deal of patience with their losers but get nervous about locking in gains and sell them to quickly – the exact opposite of what wealthy traders do. Wealthy traders realize that they may actually have more losing trades than winning trades so they quickly get out when they are wrong. It is the only way to ensure that they can give their winners the attention they deserve.

They coddle their winners and kick their losers to the curb without a second thought. (more…)

Reflections on Life, Motivation, and Impotent Goals

  
  Education
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Motivational guru Tony Robbins once observed, “People are not lazy. They simply have impotent goals – that is, goals that do not inspire them.” My experience is that this is very true of traders: many of their goals are impotent. They are written in a journal or a post-it note attached to the computer monitor, but they are not inspiring goals. They don’t bring a hunger for action.

We chastise ourselves for lack of discipline when we don’t follow through on our goals, but we never stop to think that maybe our goals sell us short.

Show me a person who has trouble getting out of bed in the morning and I’ll show you a person with impotent goals. A child has no problem leaping out of bed early Christmas morning to see what Santa has brought. That same child on a school morning? It might take a few rousings to get out of the sack.

A big part of middle age is getting so caught up in putting out fires that you forget all about setting the world ablaze. Kids have no problem dreaming about hitting that 9th inning home run for the Yankees or being a superhero. Somehow that gets lost in concerns over “practical” matters, as The Little Prince realized. But an impotent life is not a practical life at all.

Your job isn’t to find the next great market trend or setup. It’s to find the goals that inspire you, that will get you springing out of bed in the morning and excited to be tackling life through the day. As long as you have those, you’ll stay young at heart–and spirit. And you’ll persist and find those trends and setups.

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