Archives of “February 2019” month

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10 Steps-Every Trader Should Take

  
  Education
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  1. Trade in a conceptually correct manner
    Trading because Mars lines up with Venus might work occasionally, but there is no real basis for trading in this manner. Patterns you trade should make sense and have some sort of statistical edge. It does not have to be complex. In fact, simpler is better (e.g. I’m known as the trend following moron).
  2. Trade small
    Any ONE trade should NOT have a material impact on your life. ANY one loss should be viewed as an “expense”—no different from what you do in any other business. Remember, It’s a marathon, not a sprint! You’ll only be smarter in the future. If you’re in the learning phase, I can promise you you’ll look back years from now and say “what the heck was I thinking!”
  3. Ignore the news
    Ever have a stock you’re long come out with good news and then you watch in agony as it drops? Every be short a stock that comes out with bad news and then you watch in agony as the stock rises? The news is irrelevant. It’s the reaction to the news that’s relevant. What is, is.
  4. Forget about logic—Don’t worry about the “whys”
    Stocks trade on emotions–period. There often is no logic as to why a stock rises or falls. Again, what is, is.
  5. Know YOUR Methodology
    Each method will have its sweet spot. I can’t speak for every methodology, but I can tell you this about momentum based swing trading: It works well in trending markets (duh!) and doesn’t work so well in choppy markets (duh duh!).
  6. Don’t deal in mediocrity 
    Pick the best and leave the rest. Stocks should be in an obvious trend (or transition) and set up. The stock should also trade “cleanly.”
  7. Do NOTHING unless there is something to do! 
    Your performance is based on the good trades less the bad trades. By avoiding the markets in less-than-ideal conditions, you’ll have fewer bad trades hence, better performance! My favorite thing to do is to take the “can’t stand it test.” If you can’t stand NOT taking a trade because all the signs are there, then you probably should take it. Otherwise, don’t trade.
  8. Stack the odds in your favor: Market/Sector/Stock
    Your odds will greatly improve if only trade when the market, sector, and stock are all trending in the same direction.
  9. Let things work 
    Results in trading (especially momentum based swing trading) are often skewed—most of the gains come from a few big winners. Therefore, it’s crucial to catch these occasional homeruns. And, you’ll never catch any big winners if you micro manage your trades ( i.e. exit early).
  10. Money management 
    Trade small, use stops, take partial profits when offered, trail stops.

14 One Liners For Traders

  
  Education

If your not sure and don’t have an edge, cash IS a strategy.

If you are on a cold streak, reduce size by 70% and tighten stops for a week.

Stocks aren’t people, they cant be trusted, an algorithm doesn’t care that you think you know the story or the chart.

Don’t be “all in” in any name, you will blow up your account.

It’s totally cool to change your mind right after a trade, the market changes by the minute, so should you.

Pick one strategy and stick to it. This may take time if you are a beginner.

You have to break a few eggs to make an omelet, so take losses but keep them very small.

I haven’t taken someone else s idea in a long time, you have just as good a chance of being right or wrong as some other putz.

Don’t have 15 technical indicators on your screen, that’s and EKG not a chart. Less is more.

Don’t trade pissed off, it will crush your P&L

Guess who wins when you “revenge” trade?

Take partial profits on the way up and raise your stops.

When you have three losing trades in a row, take a walk around the block. You may get an epiphany, at the very least it’s therapeutic.

Realize early that the market will always be smarter than you.

Ignorance, Greed, Fear and Hope

  
  Education
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Ignorance, Greed, Fear and Hope

In the book “Reminiscences of a Stock Operator,” Edwin Lefevre writes: 
“The speculator’s deadly enemies are: Ignorance, Greed, Fear and Hope.“

In today’s commentary we will take a look at “Hope” and see why it is one of the four deadly enemies of successful market timing. 
Each of us has a desire for success. That is why we use market timing in our investing. Not only to increase our gains in both bull and bear markets, but importantly to protect our capital against loss. 
But that same desire for success can stand in the way of our ability to recognize reality, even if it is right before our eyes. All of us have a survival instinct that typically causes us to focus on good news. Bad news is avoided, or at least put on the back burner. 
When we take a position in the market, whether bullish or bearish, we hope it will be successful. Hope can be such a powerful emotion, that when the same trading plan that told us to enter a position originally, reverses and tells us to exit immediately, our emotions may very well focus on the possibility that if we just hold on a bit longer, any loss may be erased.  (more…)

Movie Titles Entirely Appropriate For This Market Moment

  
Education, Life
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Movie Titles Entirely Appropriate For This Market Moment:

Outrageous Fortune

Bubble Boy

Flight of the Phoenix

Against All Odds

Miracle

The Bank Job

The Quick and the Dead

The Comebacks

The Perfect Score

Wild Hogs

The Big Squeeze

The China Syndrome

As Good As It Gets

Wag The Dog

The Fast & The Furious

Fearless

Proof Of Life

Human Nature

Leap Of Faith

Sexy Beast

The Road To Perdition

Unbreakable

Analyze This

4 Dirty Words of Trading

  
  Education
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Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and neither do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks.

Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.

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