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rssPractical Aspects of Trading…
Successful traders examine the current market conditions to determine if they are bullish, bearish, or a trading range environment. After determining the current market environment traders can select the tools from the their trading tool box that perform best in the current conditions. When the market conditions change then traders need to adapt to the new market environment by selecting new tools that are most appropriate for the new market conditions.
In addition to adapting to the current market conditions by using the appropriate tools from the trading tool box there are several practical aspects of trading that traders need to master.
Never enter a position without having a plan for exiting the position. If you Do not know where to get out of a position you should not enter it in the first place. In swing trading time frames stocks often run to the next resistance or Support level and then stall. We have seen that stocks rarely remain outside the Bollinger bands for long, so when a position reaches the Bands it is often a good Place to look at profit taking, especially in trading range environments.
There is usually no need to rush in when the markets trend changes. Any trend worthTrading does not require you to be in on the first day, by definition. It is usually better to make sure the trend change is real and then react rather than assuming that the first Day of a potential change is something that is going to continue.
There are a lot of jobs where people get paid every Friday. Trading is not one of them. There will be profitable weeks and losing weeks as the normal statistics work out. Remember that if you make enough trades there is a reasonable probability of seeing…
ten losing trades at some point, even with good trading systems. This is part of trading and traders need to allow for it when they work out position sizing and money management techniques.
You do not have to trade every day or take trades just because they came upon the evening scan. Carefully consider the recent price and volume action in the market before taking positions. Look for the best trades, consider long trades that have not shown a lot of recent distribution and have ‘room to run’ before hitting the next resistance area or the upper Bollinger Band.
Make sure that your position sizing is such that if all your current positions were stopped out that the total loss is something that is still comfortable. This happens from time to time and wishing it did not will not change it. Be prepared by using sensible position sizes.
Review each of your positions every evening and determine if it is something you still want to be holding based on the recent market action and the price volume patterns of the position. Longs going up on declining volume are showing weakness and I generally close out those positions and put the money to work in something stronger. You are hiring a stock to do a job for you, if it is not doing the job fire it and hire another. (more…)
Doubt everything.Find your own light
These were the last words of Buddha ,in the Theravada tradition.The title Buddha means ‘Enlightened one ‘ or ‘Awakened One’.In Buddhism ,the Buddha refers to Siddhartha Gautama,born in Lumbini in modern Nepal.According to most traditions ,he lived many lives before coming to our present world era.Born a prince ,at the age of 13 he was escorted out of the palace.Buddha came across the ‘four sights ‘ :an old crippled man ,a diseased man ,a decaying corpse and finally an ascetic.Gautama realized that age ,disease ,death and pain were inescapable ,and that the poor would always outnumber the rich.However ,even if one was wealthy ,everyone shared age ,disease ,death and pain.Neither money nor peace can relieve people from fear and anxiety ,or lead them to ultimate happiness.
Departing from the palace and wearing rags ,Gautama studied meditation ,becoming an ascetic in his search for enlightenment.He found that the true liberation from worry could be attained only by reaching a state of absolute tranquillity and enlightenment.Buddhism had evolved into three major schools of teaching ,and its peaceful and forgiving tenets have influenced later religions.
After 45 years of teaching ,the Buddha passed into Parinirvana ,the state of Nirvana attained at death.in his last sermon ,he encouraged his disciples to diligently ‘doubt everything ‘and seek the truth ,not holding on to that which is impermanent.
10-year Government Bond Yields Around the World
3 TRADING COMMANDMENTS
You Learn More From Your Enemies Than You Do From Your Friends. Make sure you take the criticism’s of others and use them to your advantage by recognizing that the more others criticize the more you value your own beliefs, trading or otherwise.
Be Careful Who You Get Into Bed With. Although not a trading rule per se, keeping good, solid company outside the charts, can help you be the best trader inside the charts. “Trust and integrity between two people are the most important variables in life and in business”
Never Operate From a Position of Fear. “If you are fearful in the markets, either as a result of taking a recent loss or some other mistake, or even as a result of being nervous about the level of risk you are taking, then you are putting yourself in the position of making and unclear and hence incorrect decision”
H + W + P = E
Understanding your own trading psychology is critical to being a successful portfolio manager.
Are you focused on trying to make money? Or are you more focused on trying not to lose money?
The truth is that making money is the easy part. It is keeping it that is so hard.
Statistically, you are going to make money half the time anyway as I have found that discretionary traders make money on approximately 45-55% of their trades. That is not my opinion – that is what the data say.
The difference between being profitable and not profitable or modest and substantial returns is not about the frequency of being “right.” It is about how much do you MAKE when you are right and how much do you LOSE when you are wrong.
Don’t trade to be right. Trade to make money. In order to make money, you have to lose less.
As a trading psychology coach, the formula I use with my clients is as follows:
H + W + P = E
Hoping + Wishing + Praying = EXIT THE TRADE!
Thought For A Day
Worldly Wisdom from Charlie Munger
MAY DAY -International Workers Day
5 Mistakes Traders Make Again & Again
There is a big difference between bad traders and good traders, here is what I think separates one from the other:
- Bad traders continually have the desire to short the hottest stocks with the strongest momentum. What is their reasoning? “It can’t go any higher, this price is ridiculous.” Do they understand it is a bull market, no. Do they understand the technicals or fundamentals that are driving this stock? No. Bad traders just trade their beliefs good traders trade proven methods.
- Bad traders continually believe they have found the trade “That just can’t lose.” It is a sure thing. No doubt about it. They trade BIG, they trade a HUGE position size. Unfortunately the most obvious trades are usually the losing trades, so they lose, and lose big. Good traders divide out their trades so that no one trade has too big of an impact on their account. Good traders realize EVERY trade can win or lose so they plan a quick exit for if they are wrong.
- Bad traders do not do the proper homework before they begin to trade. Really Bad traders enter the markets with a mile of ego along with mud puddle deep understanding of what really works in trading. Bad traders have the belief that they are more clever than the markets and they can win based on their own intelligence. The problem is they do not do the homework of studying charts, trends, robust systems, winning methods, the right psychology for winning traders, risk/reward ratios, or the danger of the risk of ruin, or how the top performing stocks acted historically, and on and on. The good traders learn what it takes to succeed in trading, the complete story, while the bad traders learn some basics and think they are ready. They are wrong. The markets will show them.
- Bad traders make low probability trades, they are where the profits come from for the good traders. They go short in bull markets and long in bear markets. They sell naked puts on stocks collapsing into death spirals and sell calls on the best momentum stocks. They trade with big risks for small profits. They have a few small wins but some really huge losses. When they have a winner they take the profits quickly, but if they have a loser they let it run hoping that it will come back. They are the ones that lose the money, they are on the other side of the good traders trades.
- Bad traders want a good tip. They just want to be handed a winning system or a hot stock that just can’t lose. They do not even understand what all the talk of trading psychology and risk management is all about. They don’t need all that, they just want to make money. They just want the fish, they do not care about the fishing pole, bait, boat, or how to fish. Unfortunately they were to busy looking for that fish and didn’t understand the art of fishing, they will drown in the market ocean because they never learned how to swim themselves.