Archives of “February 2019” month

rss

Ten Cardinal Rules For Traders

  
  Education

The Ten Cardinal Rules

  1. Learn to function in a tense, unstructured, and unpredictable environment.
  2. Be an independent thinker versus a conventional thinker.
  3. Work out a way to handle your emotions and maintain objectivity.
  4. Don’t rely on hope and fear in the conventional sense.
  5. Work continuously to improve yourself, giving importance to self-examination and recognizing that your personality and way of responding to events are a critical part of the game. This requires continuous coaching.
  6. Modify your normal responses to certain events.
  7. Be willing to face problems, understand them, and recognize that they are in some way related to your behavior.
  8. Know when problems can be resolved and then apply methods to solve them. That may mean giving up some control in order to gain a different control. It may mean changes in your personality, learning self-reliance, or giving up independence and ego to become part of a trading team.
  9. Understand the larger framework in which trading occurs—how the complexity of the marketplace and your personality both must be taken into account in order to develop the mastery of trading.
  10. Develop the right mind-set for trading—a willingness to commit to the kinds of changes in personal habits and beliefs that will drastically alter your life. To do this requires a willingness to surrender to the forces of the game. In order to be able to play at a maximum level, you have to let go of your ego and your need to have things your way.

The Unofficial Pundit-to-English Translation Guide

  
  Education
When a pundit saysThey really mean
“We suggest reducing exposure”We were betting the Brits would vote remain
“I am not an expert in foreign policy, but…”Prepare for a thoroughly uninformed, useless opinion
“The macro forces at work”Allow me to construct a reassuring narrative
“The smart money is betting”I won’t assume any responsibility for this next bit of foolishness
“It has long been our position”That’s my story and I am sticking to it, even if it’s wrong
“We don’t see a recession”We didn’t see the last recession either
“We expect the second half of the year”We were wrong in the first half of the year
“The chart shows…”The fundamentals are terrible
“We still like the fundamentals…”The technicals are terrible
“We have a ‘Buy’ on the stock”Now if only we can figure out who is dumping all those shares!

Two Mistakes frequently made by Stock Traders

  
  Education
#  #  #  #  #  #  #  #  #

The first big mistake is the flawed logic of extrapolation. Many traders and investors assume that a trend will remain in force until an “event” comes along to change it. But market trends are not like billiard balls on a pool table. This false assumption will put you on the wrong side of the market more times than not, especially at major turning points.

The second big mistake is to suppose that news events drive market trends. In fact, the opposite is true: economic, political and social events lag market trends.

Trading Sins

  
  Education
#  #  #  #  #  #  #  #  #  #  #
  • over-trading
  • too much leverage
  • under capitalization
  • not adhering to stops
  • trading without a plan
  • paying short thrift to proper execution
  • assuming too much risk, not respecting it
  • trading products I don’t fully understand
  • competing where I have no edge
  • becoming too emotional
  • under-valuing the need for ample liquidity
  • misaligning time-frames (the time a trade typically needs to play out, versus my expectation/need for it conclude)

Successful traders fail all the time. In fact, many even fail a majority of the time. The difference is that their failures are not a failure to execute their plan. The failure rests in the fact that the expertly chosen trade turned out to be wrong (nobody can be right 100% of the time – except Congress). And when the trade was wrong, they took their loss which resulted in minimal damage to their portfolio and moved on to the next opportunity.

Trading Rules

  
  Education
#  #
  • The purpose – a good set of trading rules promote growth they do not create limitations.  Not trading during x period of time is not a rule, it is a limitation.  Do not get me wrong there are times when you need to limit yourself but that is not all times.  If you have a plan, you will be able to understand when you are most at risk of trading poorly.  Eventually, you can work through it.  Sometimes all it takes is being aware of it.
  • Simple- They need to be simple.  They need to hang over and direct all of your actions.  The only way you are going to remember and use them to your fullest ability is if you can understand them.  Rules are more simple than limitations.
  • Must apply– Rules or a trading plan are only as good as your ability to apply them.  Once again, you have to believe in them, you have to make them your own.
  • Cohesive- All rules needs to eventually act as one.  Each rule dependent on another.  This will make it easier to follow and understand which one you are breaking.  This also makes the application easier.

40 One Liners For Traders

  
  Education
#  #  #  #  #  #  #  #  #

1. Trading is simple, but it is not easy.40 rules

2.  When you get into a trade watch for the signs that you might be wrong.

3.  Trading should be boring.

4.  Amateur traders turn into professional traders once they stop looking for the “next great indicator.”

5.  You are trading other traders, not stocks or futures contracts.

6.  Be very aware of your own emotions.

7.  Watch yourself for too much excitement.

8.  Don’t overtrade.

9.  If you come into trading with the idea of making big money you are doomed.

10.  Don’t focus on the money.

11.  Do not impose your will on the market.

12.  The best way to minimize risk is to not trade when it is not time to trade. 

13.  There is no need to trade five days a week.  

14.  Refuse to damage your capital.

15.  Stay relaxed. (more…)

Go to top