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Ten Powerful Psychological Traits of the Rich Trader

  
  Education
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Ten Powerful Psychological Traits of the Rich Trader

  1. They have the ability to admit they were wrong and get out of a trade. They know the place where price proves them wrong.
  2. They have the ability to not only close a losing trade but reverse and go in the other direction when it is called for.
  3. The rich trader is not trying to prove anything about themselves they are focused on making money.
  4. They do not fall in love with an idea, currency, commodity, or stock they will make trades based on price action.
  5. Rich traders know that the market action is their ultimate boss regardless of their opinions.
  6. No matter how sure they are about a trade they still ALWAYS manage the risk.
  7. Rich traders get more aggressive when winning and trade smaller or take a break during a losing streak.
  8. A great trader is one that can admit to anyone that they were wrong.
  9. Rich traders do not believe their own hype, they know they can not really predict the future they can only react to current reality and the probabilities.
  10. Rich traders love what they do, win or lose.

When you are trading like that, it is hard to be beaten. Time is your friend.

Quantifying Low/Risk High/Reward Trades

  
  Education
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lowriskQ:  How can do you quantify odds of 10-1 in your favor before you make a trade? Is it your profit goal is 10x more than your stop loss? 10 indicators that look good and one that does not look good? Can you share with the group how you get to 10-1 odds? It may not be an easy answer, but I wonder if you could expand.

Think of it this way. After I’ve performed my analysis of all of the things I look at (fundamentals, technicals, sentiment) and list them out at the price I’m considering making a specific trade, they must without any measure of doubt be highly tilted in my favor. In other words, it must fit my definition of what I consider to be a low/risk high/reward setup. For every negative I can find that argues against a specific trade, I need more than just a few positives to offset it.

What results from this analysis is that the total number of trades I make is lower than most, but the percentage of average winning trade is higher as well as my win/loss average. (more…)

The importance of success in succeeding at trading.

  
  Education
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Different shapes and forms.

Failure comes in all different shapes and forms.  The distance you fall after a failure,  time it took to get to the failure,and whether you get back up determines that shape and form.   I realize there are a million posts on why failure is important but success is important, especially in trading.

Failure is different in trading.

Failure/losing in trading is not the same as failure in other contexts.  What is working right now is always changing. What happens to many traders is that they waste money until their system is working again or they run out of money before it happens.  I believe in having a process so you can adapt to that change.  When you find something that works continue to do it till it does not work.  A 100x easier said than done.

Trading is gambling for some. (more…)

Ritualize practice

  
  Education
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“The best way to insure you’ll take on difficult tasks is to ritualize them — build specific, inviolable times at which you do them, so that over time you do them without having to squander energy thinking about them.”  The best time to prepare for trading is before the market opens or late in the evening after you have had a break from the close.  Execution is based on proper preparation.  If you are properly prepared for the battle then the execution will be a synch.  Remember:  trading is war PREPARE your weapons.

If you wish to excel at trading it is going to take a lot of hard work but we all know that anything really worth having comes with a sacrifice of one thing for another.  As Mr Swartz sums it up:  “If you want to be really good at something, it’s going to involve relentlessly pushing past your comfort zone, along with frustration, struggle, setbacks and failures. That’s true as long as you want to continue to improve, or even maintain a high level of excellence. The reward is that being really good at something you’ve earned through your own hard work can be immensely satisfying.”

Use discipline to eliminate impulse trading

  
  Education
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  • Have a disciplined, detailed trading plan for each trade; i.e., entry, objective, exit, with no changes unless hard data changes. Disciplined money management means intelligent trading allocation and risk management. The overall objective is end-of-year bottom line, not each individual trade.
  • When you have a successful trade, fight the natural tendency to give some of it back.
  • Use a disciplined trade selection system: an organized, systematic process to eliminate impulse or emotional trading.

  • Trade with a plan – not with hope, greed, or fear. Plan where you will get in the market, how much you will risk on the trade, and where you will take your profits.
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