Summary of Last 6 Days
Archives of “January 2019” month
rssSecret Trading Ingredient-Video
10 Trading Lessons for 2011
1)You can’t succeed overnight. Most retail/aspiring traders get hooked on trading because they want money and they want it NOW! Over-trading, scalping, over-leveraging, random decisions, greed and the mirage of getting rich quick will turn trading into gambling.
A common sense rule says that – in order to make a lot of money fast, you either 1) steal, 2) you are a genius inventing or discovering something new, something that everyone will use or buy from you (like Google, Facebook, Angry Birds) or 3) gamble, if you are really lucky.
Learn from your own mistakes, don’t repeat them, practice and persevere. It doesn’t matter if you count Elliott waves better than anyone else or if you anticipate a rate hike 6 months in advance. It only matters how you control your emotions and your money.
2) Focus your efforts on the things that work best for you. If there is one trading strategy that works for you, then stick to it as long as it works. Don’t waste time testing everything you find on the Internet and don’t listen to everything you hear or read. Too much information can lead to confusion, difficult choices and failure – eventually.
3)Losing is part of the game but recovering is not an easy task and requires smarter trading decisions.
Have you ever been on a diet?
Common sense rule, again: if you have gained 40 lbs. (18 kg) in 1 year, don’t expect to lose 40 lbs. in 2 weeks. It takes a lot of work to get rid of them.
So if your trading account is down 50% after 2 months, you’ll have to double your remaining equity to break even. Will that be easy? I doubt.
4)Making mistakes is normal but rather than give up, try to learn something from your own trading mistakes, bad strategies, emotions etc.
If you don’t succeed, you aren’t out of the game.
Make a list of things that didn’t work – check it regularly so you don’t forget them. Avoid them in the future.
5)If you keep doing the same thing and you are constantly losing, it’s obvious that you are doing something wrong. Is your trading strategy constantly giving poor results? Change it. Are you always predicting the wrong market direction? Stop predicting – trade what you see, not what you think or expect.
If you want to achieve different results, then you must change your actions. (more…)
The “secret” ingredients
To be successful in the markets you need to know:
– what to buy (equity selection);
– When to buy it and when to pass on it (risk management);
– When to exit (time management).
The most essential part of equity selection is finding/creating a trading system with positive expectancy. Look for the catalyst/catalysts than has/have the potential to start a big move in the desired direction. There are two catalysts I focus on – earnings related and sector related. I pay attention to price, because it measures the only factor than really moves markets – confidence. It always says more than any other source of information. Reaction to news is more important to news itself.
Risk management has two basic elements: defining risk/reward ratio for every position I consider to get involved in and position sizing (how much to buy, what % of capital to put on risk).
Time management involves taking into account the opportunity cost. How long to stay in a position?
Happiness
Role of Luck and Skill
There is still an element of luck or randomness in the markets. You can research a trade extensively and be absolutely convinced that it will work—but still end up losing money on it. No matter what you do, you won’t be right on 100% of your trades. What does this mean for traders?
As Michael Mauboussin writes in a white paper for Credit Suisse, “Where there is luck, focus on the process”. You can’t control the outcome, because it is subject to some randomness—but you can control the input, which is the process. You want to have a process that allows for the element of randomness but which is still robust and which you can adhere to.
If it’s helpful, think about the distinction between a well thought-out trade that happens to lose money versus one that makes money. The first is a losing trade, while the second position is a winner, because it makes money. That is just talking about the outcome. But they are both good trades, in the sense that they were put on with careful consideration. Contrast that with a trade that is a winner—i.e. it made money– but was basically an impulsive decision and thus a bad trade. By focusing on the process over the outcome, we should be trying to make a series of good trades and avoiding bad trades like the plague. Over time, the results will take care of themselves.
Mystery Trader Revealed…And His Name Is 'Hope'
The UK’s Daily Mirror newspaper has uncovered the FX trader who dropped over $300k in a Scouse club. It is a 23-year old ‘self-taught’ barrow-boy named (somewhat ironically in our view) Alex Hope. Self-described as “talented (three years in and a six-figure salary, hhmm), charismatic (its amazing how much ‘charisma’ a GBP125k bottle of bubbly will buy), and thoroughly likeable (ditto) man. Alex Hope exudes knowledge…” and is willing to share it with you according to his website. How did he become this B.S.D. of the FX markets? “I took two months off my job at Wembley, got really obsessed with reading charts and got the guts to start trading properly.” This self-made rosy-cheeked young man with a penchant for mind-numbingly-arrogant-looking photos on his website may have just become the poster boy for all that is ‘great’ about the free market – or perhaps a skim through his blog and media exposure will reassure us all that anything is possible as we note he does have some good taste (not just in Champagne) in RTing our posts on Twitter.
We can only HOPE that the next time he decides to go down the rub-a-dub-dub for a Leo Sayer, maybe he’ll take some of us Septic Tanks with him on the frog-and-toad…as the days of the ship-it-in-large-on-the-left John, done-a-yard by-breakfast spot FX trader are clearly back with us.
And here is his Bio, enjoy:
London born and bred, Alex Hope, 22, is a self-taught trader who specialises in the Foreign Exchange Market. Despite his tender years, Alex is a name to watch out for in the city; an expert in the UK economy, he works the currency markets, regularly trading millions. (more…)
Euro-area industrial production disappoints, 0.1% vs 0.2% exp m/m
Industrial production in the 18 country-strong Euro-area grew by a marginal 0.1 per cent in October, indicating a poor start to the fourth quarter.
The 0.1 per cent growth was lower than economists’ expectations of a 0.2 per cent expansion and will do nothing to raise optimism over the outlook for the euro-area economy.
The biggest improvement month-on-month was in the production of non-durable consumer goods, with production rising 1.8 per cent in this particular sector.
However, energy production dropped 1.9 per cent compared to September and capital goods dipped by 0.2 per cent.
Year-on-year, industrial production improved by 0.7 per cent but the monthly figures will likely be closely scrutinised by economists, who are already concerned about the downside risks to the euro-area economy. (more…)
This Way Companies Calculate EBITDA -Biggest Manipulation in Accounting
5 Characteristics of Successful Trader
Knowledge – A trader must put in the time and effort to study and learn the proper skills in order to be successful. Whether that is through technical or fundamental analysis, one must invest in their education. They must completely understand their market, and its ideal as a beginner to focus on one market and be a specialist. A part of the knowledge and education is devising a game plan or strategy for trading. Writing down your rules and sticking to your trading plan is a key to success.
Controlling your emotions – The ability to control your fear and greed is paramount to success. A successful trader will have a balanced emotional state regardless if he/she is winning or losing. Ensuring the trader has a clear head and is able to pull the trigger and take trades every time an opportunity presents itself.
Patience – A successful trader can sit on the sidelines for days waiting for the proper setup. They don’t jump into a trade just for the sake of trading. Yes there may be opportunities, but the smart trader waits for trades that meet their trading rules and system. Over trading by beginner traders is a big obstacle to overcome. A need to always be in the market will lead to taking trades that are likely too risky. Learn patience, it’s a key to success. A winning trader usually has an extraordinary amount of self control, and often the best trade is no trade.
Discipline – There are no 100% winning traders and taking losses are part of the trading profession. It is about finding high probability opportunities and managing the risks on each trade. A trader must stick to their trading plan and discipline is the key to success.
Confidence – Having the confidence in yourself and your system to make your profit or take a loss when your method tells you to is a winning trait. Confidence usually comes from experience and knowledge.