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Archives of “January 12, 2019” day
rssPeter Lynch Talks About Bottom-Fishing
10 Trading errors rooted in a thinking methodology can be changed – Disciplined Trader
7 Bad Habits of Traders
Trading with no stop losses. You can’t control your profits but you can control and limit your losses with a planned exit. Not having an exit plan can be very expensive when a trend takes off against you and you start hoping instead of just cutting your losses and moving on.
- Your opinion can be very expensive. Trading your opinion against all other market participants can be very expensive. The market goes where it wants and when you disagree with where it is going it will cost you.
- “Egos are expensive things.” – Ray C. Freeman. Inflated egos cause a trader’s #1 priority to be proving they are right and refusing to admit when they are wrong. It is very expensive for ego gratification to be above making money.
- Trading off predictions can cost a lot of money when they are wrong. There is more to be made by reacting to what the market is doing instead of predicting what you think it will do later.
- Stubbornness causes small losses to become big losses. It causes a trader to make the same mistake over and over becasue they do not assimilate feedback they keep doing the same thing over and over and getting the same results.
- Not having an exit strategy for a winning trade can be very expensive, it is possible to ride a big winning trade into being a big loser if you do not have a set way to take profits. Trailing stops and targets can put the profits in the bank.
Trading too big of position sizes for your account size can be very costly because no manner how good your winning trades are you are set up to give back the profits with a few big losing trades.
Theory vs Practice
10 Trading Mistakes
- Are you trading without a plan? Trading without a plan makes you emotional and a gambler.
- Do you ever trade too big for your trading account size? Big trades are bad trades for the emotional engagement and risk of ruin that they entail over the long term.
- Do you risk losing more if you are wrong than you will make if you are right? The biggest driver of profitability in your trading will be big wins and small losses. Big losses and small wins is a sure path to losing your trading capital.
- Have you traded without studying charts to see what has happened historically with similiar price patterns? If you do your homework you can make money understanding possibilities and probabilities from past patterns. Trading your own opinions will usually put you on the wrong side of the market.
- Did you trade a system before you back-tested it?Or are you just trading blindly?
- Have you ever exited a trade due to fear instead of due to hitting your stop loss or trailing stop? The right exit is what determines your profitability and whether your win is a big one or your loss is a big one.
- Have you ever entered a trade becasue of greed without an entry signal? Chasing a trade after the trend is over is a great way to lose money consistently and quickly.
- Have you ever copied someone else’s trade not knowing their time frame or position size? Ultimately you have to trade your own system and your own method that matches your own personality and risk tolerance. Only you can make yourself profitable with faith in yourself and your method.
- Are you that person that loves to short during market up trends and miss a whole up move?The easy money is on the side of the trend in your time frame going against the trend is a great way to lose money.
- Are you that knife catcher that keeps going long at the worn time in a down trend? When everyone is exiting a market that is the worst time to be getting long as wave after wave of holders are leaving.
Focus On What You Can Control
- You can control what stock to buy.
- You can control how much money you put behind the idea.
- You can control which markets you trade in.
- You can control how much you are willing to risk per trade.
- You can control what type of stocks you buy, big caps, only small caps, only over Rs 50 only under Rs 10, etc.,
- You can control what kind of set ups you buy.
- You can control when you get in or out, barring a halt.
- You can control when to trade or when not to trade.
- You can’t control the outcome of the trade.
- You can’t control how the market will react to the news.
Don’t fret over what you can’t control, shake it off, once you put the trade in what the market decides to do is out of your control.
What are the Constants in Investing?
What impacts most in Machine learning
THE FIBS TRADERS TELL
1. The losing position wasn’t my fault, the market moved against me.
2. The trade was right and the market wrong.
3. I just have bad luck.
4. Eventually the stock will go up (or down)…eventually.
5. Bigger size equals bigger profits.
6. No need to close the postion just yet. I can average down.
7. Because I made so much money on the last trade I can take on more risk the next.
8. If the market is going down I can’t make any money.
9. I need to trade a larger account in order to be a better trader.
10. I’ve had many winners in a row, so now I need a big loser.
Any of these resonate with you? I am sure there are others but there is not enough room here to elaborate. Besides, I need to get back in the market. It can’t move without me!