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7 Weakest Points of Trading

  
  Education
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The weakest part of any trading method is the trader themselves. There are many, many, robust trading systems and methods that do make money in the long term. The problem is the trader having the discipline and mental toughness to trade one of them consistently. The vast majority of time it is not a system failure but traders that fail in this game through one of seven common errors. If you can understand these error and overcome them you could make a lot of money in the right market conditions.

  1. The trader must have the discipline to take the system’s entries and exits.
  2. The trader must have the discipline to take the stop loss on a losing trade when it is hit and not keep holding and start hoping.
  3. No matter the method the trader has to manage risk through proper position sizing, getting greedy and trading too big will blow up even the best systems.
  4. It is the trader that must have the perseverance to stick to the method even during losing periods, and also stick with trading until success is reached.
  5. If a trader can not manage their mind then the stress will break them, I have seen this happen many times. If you can’t handle losing you can’t trade.
  6. The trader must find a robust method, must understand why it has an edge, and must believe in their methodology.
  7. The trader has to know themselves and trade the method that fits their risk tolerance levels and own psychology. (more…)

Process and Strategy

  
Analysis, Education
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The first step, assuming you have plan, to out perform a strategy is to have an extremely efficient process.

What a process provides:

Clearer mind:  There are many things in trading that are repetitive. Clean up as many as possible.  Find a better use of your time.  Traders are some of the hardest workers I know, they work long hours, but my question is why?  Think of it like making a phone call.  Some traders have to go to the bank to get quarters, then walk two blocks to a pay phone, call the operator for the phone number, and then make the phone call. Some traders hit one button and reach the person.  I am not saying you should not work hard, just work more efficiently.

Focus:  Once all of the little things are taken care of you can now focus on what is important, the market.  This will dramatically improve your execution. You can only execute well over time if it is you and the market. You can take more intelligent risks because you have more of the RIGHT information. Have you ever been in a trade, then when you go back to review a trade, you realize you missed something important? More than likely that is a process problem.  It is important to accurately attribute the importance of that information and realize that hindsight is a horrible recorder. I would rather make that decision when I can do something about it. This takes trial and error but a pattern will develop and once it does it is your responsibility to constantly monitor it for change.

Anticipation: Anticipation is key in trading because the market is always leaving cues to what it is going to do next or that what it is going to do next is not tradeable.  We teach our traders to have a progression, much like a quarterback would.  Anything can happen and having a progression will help you to take advantage of it. (more…)

10 Great Quotes of Jesse Livermore

  
  Education
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“Do not anticipate and move without market confirmation—being a little late in your trade is your insurance that you are right or wrong.” -Jesse LivermoreJL-ASR

“The good speculators always wait and have patience, waiting for the market to confirm their judgment.” -Jesse Livermore

“{Limit} interest in too many stocks at one time.  It is much easier to watch a few than many.” -Jesse Livermore

“Experience has proved to me that the real money made in speculating has been: “IN COMMITMENTS IN A STOCK OR COMMODITY SHOWING A PROFIT RIGHT FROM THE START. ” -Jesse Livermore

“As long as a stock is acting right, and the market is right, do not be in a hurry to take a profit. You know you are right, because if you were not, you would have no profit at all. Let it ride and ride along with it. It may grow into a very large profit, and as long as the “action of the market does not give you any cause to worry,” have the courage of your convictions and stay with it.” -Jesse Livermore

“It is foolhardy to make a second trade, if your first trade shows you a loss. ” “Never average losses. ” Let that thought be written indelibly upon your mind.” -Jesse Livermore

“One should never sell a stock, because it seems high-priced.” -Jesse Livermore

“Profits always take care of themselves but losses never do. ” The speculator has to insure himself against considerable losses by taking the first small loss. In so doing, he keeps his account in order so that at some future time, when he has a constructive idea, he will be in a position to go into another deal, taking on the same amount of stock as he had when he was wrong.” -Jesse Livermore
“It is significant that a large part of a market movement occurs in the last forty-eight hours of a play, and that is the most important time to be in it.” -Jesse Livermore

“A speculator should make it a rule each time he closes out a successful deal to take one-half of his profits and lock this sum up in a safe deposit box. The only money that is ever taken out of Wall Street by speculators is the money they draw out of their accounts after closing a successful deal.” -Jesse Livermore

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