Archives of “February 2019” month
rssCiti Panic/Euphoria did its job.
25 Rules of Trading Discipline-Video
Proven Model For Successful Goal Setting
Following is a proven model for successful goal setting:
- Concise – ensure that your goal statement is simple and easy for both your conscious and unconscious mind to understand and then act upon.
- Realistic – when a goal is relatively easy for you to accept and is not too much of a leap from where you are currently, the unconscious mind can work with that and start having you put things in order for this to become a reality. E.g. If you are currently losing money in the market, it could be too big a jump for your unconscious mind if your first financial target goal was to make $1 million in the next 6 weeks. It could be far more effective to set this at $10,000.
- Ecological – the execution of all goals needs to be safe to yourself and safe for others. This is just a step to ensure that what needs to happen does not include any possible harm coming to yourself, any other person, animal or the planet. I think you get the picture.
- As now – always have your goal stated as if you have already achieved it. Nothing is more powerful for your unconscious mind than to have every part of you feel that the achieving of this goal has already happened.
- Timed and toward what you want – attach a time frame to your goal statement. Think about a realistic time frame that you can expect to work with this goal and always make the statement towards what you want not away from what you don’t want. You will see in the following goal statement example how to best do this.
- End Step/Evidence – you will need to ask yourself ‘ What will I be doing when I have achieved this goal that will mean I KNOW that it has happened?’ What do you have to see, hear or feel in order to know? Again, see the example below to give you clarity on this.
So, get busy and C.R.E.A.T.E. your trading goals from the process above.
10 Common Patterns of Faulty Thinking
Here are 10 common patterns of faulty thinking adapted from Dr. David Burns, author of the classic Feeling Goodand pioneer of Cognitive Behavioral Therapy:
All-or-Nothing Thinking: Failing to recognize that there may be some middle ground. Characterized by absolute terms like always, never, and forever.
Overgeneralization: Taking an isolated case and assuming that all others are the same.
Mental Filter: Mentally singling out the bad events in one’s life and overlooking the positive.
Disqualifying the Positive: Treating positive events like they don’t really count.
Jumping to Conclusions: Assuming the worst about a situation even though there is no evidence to back their conclusion.
Magnification and Minimization: Downplaying positive events while paying an inordinate amount of attention to negative ones.
Emotional Reasoning: Allowing your emotions to govern what you think about a situation rather than objectively looking at the facts.
Should Statements: Rigidly focusing on how you think things should be rather than finding strategies for dealing with how things are.”
Labeling and Mislabeling: Applying false and harsh labels to oneself and others.
Personalization: Blaming yourself for things that are out of your control.
Dennis Gartman’s Trading Rules List
Some food for thought for the weekend. Trading rules from great traders are always worth reading. If you spend some time to understand the concept behind each trading rule this will improve your trading skills and take you to the next level. Also check this video where Dennis Gartman talks about the concept of keeping it simple.
1. Never, under any circumstance add to a losing position…. ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
6. “Markets can remain illogical longer than you or I can remain solvent,” according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.
10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.
11. Respect “outside reversals” after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more “weekly” and “monthly,” reversals.
12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance. (more…)
Two rules for investing/trading :
Rule number one : most things will prove to be cyclical Rule number two : some of the greatest opportunities for gain and loss come when other people forget rule number one |
The Art of the COMEBACK in Trading
Just about every new trader who launches into trading before doing the proper homework ends up ‘blowing up their account’ which is generally considered suffering a 50% or greater draw down from their original equity starting point. Some of the signs of being in danger is just trading your opinion with no regard to finding a proven methodology to trade. New traders in danger have no trading plan, no understanding of risk/reward ratios or even more importantly the odds of their own risk of ruin based on their position sizing and capital at risk in every trade. They also have no idea of what their advantage is over all other participants, they have no edge. The main angle of their trading is simply their own unwarranted belief in their own cleverness. Danger! Danger! This random trading is pure gambling and we know how few gamblers leave the casino with their winnings.
Many new traders, even many of the greatest legends of trading initially blow up their accounts, learn many lessons and do come back and win. Here are the 10 lessons that enable many losing traders to come back in the game and end up with six figure accounts or even millions from some simple changes in strategy.
- Risk no more than 1% of your total trading capital per trade. Use stop losses from your initial entry.
- Only enter a trade when you believe that the profit potential is much greater than the down side based on historical performance.
- Learn to read what a chart is saying, trade the actual chart action not your own beliefs.
- Create a defined trading plan listing what you will do before the trading day begins, position sizing, entry points, risk per trade, your watch list, etc.
- Discipline yourself to follow the plan you create.
- Trade a size you are comfortable with, one that does not bring in strong emotions that distort your trading.
- Treat all your capital as your money, do not get reckless with ‘the houses money’ after some nice wins.
- Be a smart trader not a random gambler. Treat trading like a business.
- Quit believing stocks are too high or too low, stocks are at all time highs or lows for a reason and tend to continual on that path.
- Trade with the trend because you do not have a crystal ball.
- Have a strong faith in your ability as a trader AFTER you have done your homework.
- Develop complete confidence in your trading methodology AFTER you have researched historical performance. (more…)
Prayer for the Day
Prayer for the day –
Our Ben,
Who art in heaven,
Hallowed Be-nanke,
Thy auctions come,
Thy Bill’s be done,
In Twos as they are in Sevens,
Give us this day our daily Fed,
And forgive us our Treasuries,
As we forgive those that default against us,
And lead us not into recession,
And deliver us from deflation,
For thine is the borrowing, the easing, and the printing,
For ever and ever.
Amen.
Risky cravings
“When you are threatened with extinction, you act like nothing matters,” said Andrew Lo, a professor at M.I.T. who has studied the role of emotions in trading. Mr. Kerviel, he said, is a case study in loss aversion.
“The best traders are the ones who have controlled emotional responses,” Mr. Lo said. “Professional athletes have the same reaction – they use emotion to psych them up, but they don’t let those emotions take them over.”