Archives of “January 29, 2019” day

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Intrusion Kills

  
Education, Life
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Facebook’s CEO Mark Zuckerberg:

“I want to stress the importance of being young and technical. Young people are just smarter. Why are most chess masters under 30? I don’t know. Young people just have simpler lives. We may not own a car. We may not have family. Simplicity in life allows you to focus on what’s important.”

Of course, family, and other aspects of life are important, but that doesn’t take away from Zuckerberg’s wisdom. Want to make something big happen, like trend following success, then avoid distraction. Period.

HOW DISCIPLINE HELPS IN TRADING

  
  Education
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“Discipline in executing each and every trade according to your trading methodology is the secret to your success. If you want to improve your trading, what you need to do is very simple. Before you enter any trade, imagine that you will have to explain this trade to a panel of your peers, by explaining to them the reason for your entry, your money, trade, and risk management guidelines, and why you exited the trade. Imagine having to explain why you chose this particular market and this particular time frame, along with how you set objectives for the trade, and how you determined where your initial protection would be. If you can truly do this, I strongly believe that you can be successful.

Just prior to entering every trade, try to imagine yourself executing the trade perfectly. Imagine how it will feel when you enjoy having made money with your trading.

Yes I know, you don’t have time to do that. Why? Because you never plan your trades ahead of time. You probably don’t have a strategy, and instead of waiting patiently for trade that meets your well-defined parameters and your thought-out plan, you just jump in the minute you think you see something that looks good.

You need to take a lesson from a spider. The spider waits patiently in his web until some unsuspecting insect flies into the spider’s trap.

Have you been flying into any of my traps? I wait for trades that meet my expectations, trades that fit my plan. I wait patiently, and being kind-hearted I don’t want any of my readers to land in my web. I’d rather the unsuspecting are readers of someone else’s newsletter. But it’s amazing how often I get to feed.”

Dream world of the compulsive gambler

  
  Education
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This is a question that is standard in all the Gamblers Anonymous websites around the world. Reading this can be a shocking reminder of how close to the edge trading can be to gambling. We really need to know what the difference is. Are you a trader or a gambler? Notice once again it is pychology that means the difference, and not just following a system. Many gamblers have a system. Read on:

What is the dream world of the compulsive gambler?

This is another common characteristic of compulsive gamblers. A lot of time is spent creating images of the great and wonderful things they are going to do as soon as they make the big win. They often see themselves as quite philanthropic and charming people. They may dream of providing families and friends with new cars, mink coats and other luxuries. Compulsive gamblers picture themselves leading a pleasant and gracious life, made possible by the huge sums of money they will accrue from their “system”. Servants, penthouses, nice clothes, charming friends, yachts and world tours are a few of the wonderful things that are just around the corner after a big win is finally made. Pathetically, however, there never seems to be a win big enough to make even the smallest dream come true. When compulsive gamblers succeed, they gamble to dream still greater dreams. When failing, they gamble in reckless desperation and the depths of their misery are fathomless as their dream world comes crashing down. Sadly, they will struggle back, dream more dreams and of course suffer more misery. No one can convince them that their great schemes will not someday come true. They believe they will. For without this dream world, life for them would not be tolerable.

The Greatest Traders

  
  Education
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What separates the 10% that make money from the 90% that don’t?

10,000 hours.

In his recent book ‘Outliers’ Malcolm Gladwell describes the 10,000-Hour Rule, claiming that the key to success in any cognitively complex field is, to a large extent, a matter of practicing a specific task for a total of around 10,000 hours. 10,000 hours equates to around 4hrs a day for 10 years. For some reason most people that ‘try their hand’ at trading view it as a get rich quick scheme. That in a very short space of time, they will be able to turn $500 into $1 million! It is precisely this mindset that has resulted in the current economic mess, a bunch of 20-somethings being handed the red phone for financial weapons of mass destruction. The greatest traders understand that trading much like being a doctor, engineer or any other focused and technical endeavor requires time to develop and hone the skill set. Now you wouldn’t see a doctor performing open heart surgery after 3 months on a surgery simulator. Why would trading as a technical undertaking require less time?

Trading success, comes from screen time and experience, you have to put the hours in!

Education, education, education.

The old cliché touted by politicians when they can’t think of anything clever to say to their audience. The importance of education to success in trading cannot be placed on a high enough pedestal. You have to learn to earn, the best traders work obsessively to refine their edge further to stay ahead of the curve.

Think for yourself.

“NO! NO! NO!”… “Bear Stearns is not in trouble”…”Don’t move your money from Bear! That’s just silly! Don’t be silly!”

A quote from well known stock guru Jim Cramer aired on CNBC days before Bear Stearns lost 90% of its value. Many followed this call and felt the obvious pain as a result. As the old saying goes, “too many cooks spoil the broth” it is very much the same in trading. Successful traders blinker themselves from the opinions of others; they focus on their own analysis of fundamental and technical information.

Adapt or Die.

Market conditions change and technology advances, thus the conditions for trading are always evolving, the rise in mechanical trading is testament to that. The very best traders through a process of education and adaptation are constantly staying ahead of the curve and creating ever new and ingenious methods to profit from the markets evolution.

Fail to plan, you plan to fail.

The best traders have a well documented plan; they know exactly what they are looking for and follow that plan to the letter. Their preparation for a trade starts long before the market open, it is this meticulous planning and importantly adherence to that plan that helps them avoid the biggest demons for any trader, over trading and revenge trading.

“Be like Machine”

As human beings emotions pay a key role in our existence, for a trader emotions can be a source of great pain. Trading psychology and the management of your emotions in a trade play a key role in overall success. Fear and greed can cut your winners short and let your losers run. Dealing with emotions follows on from your plan; the more robust your plan the less likely you are to fall into the emotional mine field.

Know your tools

Every trader has a set of tools they use, DOM, Charts, News feeds etc. These tools are a traders bread and butter; they are the most vital part of a traders arsenal, without which it would be impossible to trade. The best traders have mastered their order entry methodology, they know all about the features they need from their charts. This mastery of their tools, allows the trader to get the very best out of the resources they have available to them and ensures perfect execution of their trading ideas.

Know Thyself

Behind all the egos and excess, the best traders know their limitations; they focus on what can go wrong in a trade, and expend a lot of energy in limiting and controlling their risk before thinking about profits. They have a heightened sense of self-awareness and focus on incremental self improvement.

Profit & Loss

The best traders focus on the trade itself rather than the P&L; they view each trade as a technical exercise and focus on getting the most out of the market in accordance with their plan. They do not think in terms of the grocery payment, the electric bill and the desire to make X amount to cover a mortgage payment. Focusing on the money behind a trade can cloud technical objectivity.

In Conclusion

The greatest traders work hard to get ahead and even harder to stay ahead. Through increased and niche knowledge they constantly adapt with the market and remain profitable in every environment. Drive, tenacity and the will to succeed is the greatest edge of every successful trader.

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