Archives of “January 12, 2019” day

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Monitor yourself

  
  Education
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I define a mistake as not following your rules. Thus, for many people who have no written rules, everything they do is a mistake. But if you have followed the first four steps, then you will have rules to guide your trading and you can define a mistake as not following those rules. And, of course, when you repeat the same mistake over and over again, then that is self sabotage. However, by monitoring your mistakes and continuing to work on yourself, you can minimize the impact of such mistakes. People who do this, in my opinion, will tend to produce consistent, above average profits

5 Quotes from Market Wizard Martin Taylor

  
  Education
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As I made money, I got more and more confident, and I increased the position each time. Ultimately, I put on a position where I was completely wrong. I just held it, held it, and sold it when my account was back down to 2,000. Over a five-day period, I lost everything that I had made over the prior six months. – Martin Taylor

This was Taylor’s description of how he got started in his trading. It is a telling example that almost any trader can relate to. Learning how to take small losses is extremely important to all traders, regardless of their approach. For Taylor, it took a tremendously big loss to get the point across.

The conclusions I drew from losing all my profits were: First, I didn’t know what I was doing, and second, I really wanted to know what I should be doing. I also realized that trying to make money out of big macro moves was a mug’s game. – Martin Taylor

That huge loss really shook Taylor’s confidence. He realized that there was quite a bit that he still needed to learn.

His intellect, however, often got in the way of his investing. If he was bullish on a stock for 10 reasons, he could always think of nine reasons to be bearish, which would cloud his mind to such a degree that he would end up not buying it. – Martin Taylor

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You Are Having Trading Skill or You are Lucky ?

  
  Education
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Traders with skill have large gains after 100 trades and are relatively quiet, traders that were lucky have huge gains after a few trades and are very loud, then very quiet for the next few trades that usually bring their account to zero.

Traders with skill risk 1% to 2% of their trading capital per trade and win in the long term, traders that are just lucky risk the majority of their account for a few big wins in the short term but lose in the long term when their luck runs out.

Traders with skill use a successful method with many stocks in different markets, traders with just luck are only successful with one stock and when its up trend ends their winning streak ends.

Traders with skill have winning track records over many years, traders with only luck only have winning track records measured in months.

Traders with skill have risk management as a top priority, traders with only luck do not understand why risk management is important, yet.

Traders with skill are trading like it is a business, traders operating with luck are trading like they are a gambler in a casino.

Traders with skill use a trading plan and back tested method, traders with luck make guesses and are sometimes right.

Traders with skill have done their homework, traders with luck think they are naturally smarter than the market.

Traders with skill are disciplined and stick to their system, traders with luck make bets based on opinions.

Would you rather be lucky for a few trades or skillful for a few years? Lucky traders give back their profits when their luck runs out. Skillful traders are eventually financially interdependent due to their long term capital growth.

What makes a trader consistently profitable?

  
Analysis, Education
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There are three things:
 
1) Having an edge, which is some methodology for determining with reasonable accuracy the relative probability of the market price hitting your profit target before it hits your stop loss price.  An edge is provided by a set of trading strategies, and a set of rules for when to use which trading strategies (briefly, when to follow a trend, when to fade a trend, and when to stay out.)
 
2) The discipline and emotional fortitude to follow the rules of your trading rules flawlessly.
 
3) Sound risk and money management rules.  
 
Sound money management and risk control are the keys to being a profitable trader. It is not the prediction or the latest and greatest indicator that makes the profit in trading, it is how you apply sound trading discipline with superior cash management and risk control that makes the difference between success and failure.  (more…)

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