Archives of “January 17, 2019” day

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Trading Psychology

  
  Education
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salespic5Are you trading because you want to trade? Consider trading a business not a game.
Are you not trading? This is the opposite of trading too often. You may be so scared
of taking a loss that you avoid trading altogether.
If you get stopped out of several stocks, walk away. Paper trade until the profits return.
Follow the system. Would you be making more money if you followed your trading
signals? Understand why you’re ignoring the signals you receive.
Don’t overtrade. Sometimes the best place for cash is in the bank. You don’t HAVE
to trade.
Learn from mistakes. Review your trades periodically. It’ll uncover bad habits.
Focus on the positive. The loss your suffered today pales to the killing you made last
week.
Ignore profits. If you find yourself getting nervous about a winning trade or making
too much money, then concentrate not on the bottom line but on improving your
trading skills. Get used to making too much money.
Obey your trading signals. Otherwise, what are you trading for? Plan your trade and
trade your plan.
Don’t trade when you’re upset. This also goes for being too excited.
Abandoning a winning system. Don’t become bored with your winning system and
search for new, more exciting ways to lose money.

 

Trading Thoughts

  
  Education
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To truly become a proactive trader, you need to believe that your trade WILL go the direction you thought. This shows that you have belief in your system that finds your trade setups in the first place. If you put your trade on and the first thing you do is mark your stop or think “I hope this goes well”, then you are bound to fail as a trader. Successful traders do not hope. They do the research and use their system to find good candidates and enter the trades. It is at that point that they manage risk. They know exactly how much they have at risk and are perfectly fine if they lose that much. Why? Because it is baked into their system, and every trade does not go the way they thought. You need to be the same way in your trading.

You need to have the courage to fail, step off the curb, and enter the trade. Expect that the trade will go your way and use the power of positive thinking. Set your target, entry and your stop and then you know, at any point during the life of the trade, where you stand. If your target gets hit and you see the stock continue to go the same direction, you can’t get mad. You simply put the positive trade aside and evaluate it in a couple weeks to figure out why it continued to go beyond your target. It is at that point that perhaps you make an adjustment to your system. Perhaps you find out that it was a news item that caused the surge and then you know that it was atypical, rather than the norm, and no adjustment is needed.

In going through this thought process, you prepare yourself emotionally and as a result remove the chance of trading on emotion once in the trade. As an example, you need to be fully prepared to lose the amount invested in a single trade if your stop is triggered. If you aren’t fully prepared to take that risk, then you need to adjust the size of your trade or move on to another trade. If you prepare and emotionally accept the fact that you could be wrong, your trading becomes more mechanical and less emotional. Take some time to role-play the different scenarios and see what your reactions would be.

Dealing with Loss Aversion in Stock Trading -Anirudh Sethi

  
Analysis, Education
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Loss aversion is a characteristic human propensity, yet it can wreak destruction on a trading account if the merchant doesn’t figure out how to deal with this mental issue. Underneath, realize what loss aversion is, the manner by which it shows (the side effects) and how to oversee it. Loss aversion is an unwillingness to acknowledge a loss once in an exchange. You disclose to yourself you’ll get out in the event that you lose a specific sum cash, yet as opposed to shutting the trade when you should, you choose to hold the trade and let the loss develop with the expectation that by giving the trade “more space” it will in the end pivot to support you. The reason generally given is that if the trade is shut the loss is acknowledged and there is no real way to profit back on that exchange. The merchant is trusting their trade will pivot and move into a gainful position.

Reasons behind Loss Aversion in Trade

Acing loss aversion implies getting into a state where a merchant can assuage of the dread of loss. Once in a while, a dealer can’t adapt to pondering losing, and losing is truly a piece of trading, so no disarray ought to emerge there that an effective merchant never loses. The significant issue with loss aversion happens when a merchant chooses to escape the trade after a specific sum lost, yet soon after that happens, the broker chooses to attempt to run more with a similar trade and accordingly simply increase the loss. The merchant does it since he or she trusts that they can abstain from losing. So as opposed to getting out, the trade proceeds in would like to return to the triumphant side. Loss aversion makes merchants leave their planned arrangement. For instance, a broker’s technique lets him know or her that in the following month rewards will occur in 60% of exchange. Yet, in an exchange, the merchant begins feeling that a specific stride can be skipped to bring an extra rate. (more…)

What was your experience during the week of the October 19, 1987 stock crash?Jack Schwager’s description of Marty Schwartz

  
  Education
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I came in long. I have thought about it, and I would do the same thing again. Why? Because on October 16, the market fell 108 points, which, at the time, was the biggest one-day point decline in the history of the stock exchange. It looked climatic to me, and I thought that was a buying opportunity. The only problem was that it was a Friday. Usually a down Friday is followed by a down Monday.

The high in the S&P on Monday was 269. I liquidated my long position at 267.5. I was real proud of that because it is very hard to pull the trigger on a loser. I just dumped everything. I think I was long 40 contracts coming into that day, and I lost $315,000.

One of the most suicidal things you can do in trading is to keep adding to a losing position. Had I done that, I could have lost $5 million that day. It was painful, and I was bleeding, but I honored my risk points and bit the bullet.

I thought about going short, but I said to myself, “Now is not the time to worry about making money; it is the time to worry about keeping what you have made.” Whenever there is a really tough period, I try to play defense, defense, defense. I believe in protecting what you have.

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