Archives of “January 18, 2019” day

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RISK

  
  Education
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“Ancient man had no risk management. Everything was left to ‘fate’ and the whims of the gods. Because ancient man felt that he was merely a victim of circumstance he did not see a need to plan for the future. Therefore, he had no future. In his book Against The Gods: The Remarkable Story Of Risk, Peter Bernstein plots out the history of man’s discovery of the law of probabilities and risk management. Suffice it to say, economic progress seems to run parallel with man’s ability to discover, quantify, and manage risk. Risk and reward are two sides of the same coin. One is not present without the other. You cannot receive the reward unless you are willing to take the risk and you cannot expect to keep that reward unless you learn to mange that risk. It is imperative to master both subjects if you expect to be successful in any endeavor, especially the arena of investing/trading.”

Letting Winners Turn in to Losers

  
  Education
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Trading problem that I want to focus on is allowing winning trades to turn in to losers. Many of us have probably had a time when a trade was making big loot, and we started to count the profits like they were ours before we exited the trade. When the stock started to lose the ground it had gained, we avoided selling because we had built up an emotional attachment to the paper profits we had seen. Instead of selling the stock to lock in some gain, we opted to hold out for the stock to go back to where it used to be, promising to sell when it came back to the point where we felt good about the trade. The stock drifts lower, and eventually the gain turns in to a loss. We ultimately sell it at the bottom, swearing never to do it again. But without some reprogramming, we probably will.

The Solution

Like Kenny Rogers used to sing, “Don’t count your money, when you are sitting at the table, there will be time enough for counting, when the dealing’s done.” Do not calculate your profits before you lock them in. Avoiding the profit watch will help you avoid an emotional attachment to the paper profits, giving you greater clarity to take the exit door when the market tells you it is time to do so.

I hope this outline of mental problems and some solutions helps you become a better trader. The difference between those who succeed in trading and those who fail is not the system they play, but how well they play it. Your mind is a powerful thing, don’t let it beat you in the market.

Ten Tasks of Top Traders

  
  Education
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  1. Daily self analysis:   Successful trading is 40% risk control and 60% self-control.
  2. Daily mental rehearsal:   Practice being disciplined in your mind before you trade daily.
  3. Developing a low risk idea:   Trade with the odds on your side with a defined risk.
  4. Stalking:   Wait for the entry. Utilize patience and don’t pull the trigger to soon.
  5. Action:   Take the entry when the signal is hit. Do not freeze up. Be definitive.
  6. Monitoring:   Keep an eye on what is happening with your position.
  7. Abort:  Be ready to cut your losses, when you are wrong and hit your stop loss.
  8. Take profits:  Use trailing stop or profit target when one is hit. Allow the market to take you out.
  9. Daily briefing:   Think through your trading & what you did right/wrong based on your trading plan.
  10. Periodic review:   Is your trading working? Do adjustments need to be made?

Examine Your Beliefs

  
  Education
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There is lot of talk of trading psychology , but what exactly are the 3 or 5 things you can do to improve your psychology.
If you want to increase your muscles you go and lift weight
If you want to improve your stamina, you go and run daily
If you want to reduce weight you eat less and exercise more
What exactly do you need to do to improve your psychology.
First starting point if you want to improve your psychology is by examining your beliefs
You can only trade what you believe in.
Your beliefs drive your behavior. (more…)

The Law of Auto-Suggest

  
  Education
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“The law of auto-suggestion, through which any person may rise to altitudes of achievement which stagger the imagination, is well described in the following verse:

If you think you are beaten, you are,
If you think you dare not, you don’t
If you like to win, but you think you can’t,
It is almost certain you won’t.

If you think you’ll lose, you’re lost
For out of the world we find,
Success begins with a fellow’s will-
It’s all in the state of mind.

If you think you are outclassed, you are,
You’ve got to think high to rise,
You’ve got to be sure of yourself before
You can ever win a prize.

Life’s battles don’t always go
To the stronger or faster man,
But soon or late the man who wins
Is the man WHO THINKS HE CAN!

 

Observe the words which have been emphasized, and you will catch the deep meaning which the poet had in mind.”

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