2 Trading Quotes

“You can give anyone the best tools in the world and if they don’t use them with good money management, they will not make money in the markets. We’re convinced that a person could make a profit simply by buying and selling the markets according to the dart board if they followed all the right things as far as money management is concerned.”

— Welles Wilder

“Throughout my trading career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.”

— Larry Hite

6 Points For Traders

1.  Anything can happen in the market…and often does.6-steps

2.  There is ALWAYS someone on the other side of the trade…ALWAYS.

3.  Stock market rules are made to be broken…because there are none.  Only yours… that you never break-for buying or for selling.

4.  There may be more than one pattern at work at the same time-both diametrically opposed to one another. 

5.  If on the wrong side jump to the other.  The market is no place for marriage or inflated egos.

6.  Never listen to the herd.  Instead, follow your own analysis and the charts you use as the basis of this analysis.  This is just one of the many reasons I do not watch Blue Channels before, during, or after hours.

10 Quotes from the Book “Hedge Fund Market Wizards”

  1. All markets look liquid during the bubble (massive uptrend), but it’s the liquidity after the bubble ends that matters.

  2. Markets tend to over discount the uncertainty related to identified risks. Conversely, markets tend to under discount risks that have not yet been expressly identified. Whenever the market is pointing at something and saying this is a risk to be concerned about, in my experience, most of the time, the risk ends up being not as bad as the market anticipated.

  3. Traders focus almost entirely on where to enter a trade. In reality, the entry size is often more important than the entry price because if the size is too large, a trader will be more likely to exit a good trade on a meaningless adverse price move. The larger the position, the greater the danger that trading decisions will be driven by fear rather than by judgment and experience.

  4. Virtually all traders experience periods when they are out of sync with the markets. When you are in a losing streak, you can’t turn the situation around by trying harder. When trading is going badly, Clark’s advice is to get out of everything and take a holiday. Liquidating positions will allow you to regain objectivity.

  5. Staring at the screen all day is counterproductive. He believes that watching every tick will lead to both selling good positions prematurely and overtrading. He advises traders to find something else (preferably productive) to occupy part of their time to avoid the pitfalls of watching the market too closely.

  6. When markets are trending up strongly, and there is bad news, the bad news counts for nothing. But if there is a break that reminds people what it is like to lose money in equities, then suddenly the buying is not mindless anymore. People start looking at the fundamentals, and in this case, I knew the fundamentals were very ugly indeed.

  7. If you don’t understand why you are in a trade, you won’t understand when it is the right time to sell, which means you will only sell when the price action scares you. Most of the time when price action scares you, it is a buying opportunity, not a sell indicator.

  8. Normally, I let winners run and cut losers. In 2009, however, as a result of the posttraumatic effects of going through the September 2008 to February 2009 period—talking to clients who are going out of business and seeing 50 percent of your fund redeemed is all very wearing—I got into the habit of snatching quick 10 to 15 percent profits in individual positions. Most of these positions then went up another 35 to 40 percent. I consider my pattern of taking quick profits in 2009 a dreadful error that I think came about because I had lost a degree of confidence due to experiencing my first down year in 2008.

  9. As an equity trader, I learned the short-selling lessons relatively early. There is no high for a concept stock. It is always better to be long before they have already moved a lot than to try to figure out where to go short.

  10. Now that you have switched from net long to net short, what would get you long again? – Buying. If all of a sudden stocks stopped going down on bad news that would be a positive sign.

Traders Must Follow These Rules

More important than any entry system….Money management and trading psychology are much important

Keep Losses Small…

Trade with stops

Trade in the direction of the trend

Doubling down is a sure way to lose money and blow up

Trade with a complete plan knowing exactly what to buy/sell…how much to buy/sell and know exactly when the trade does not work… (more…)

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