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Trading commandments

  
  Education
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ten_commandments1.) Respect the price action but never defer to it.

Our eyes are valuable tools when trading, but if we deferred to the flickering ticks, stocks would be “better” up and “worse” down. That’s backward logic.

2.) Discipline trumps conviction.

No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and never believe you’re smarter than the market.

3.) Opportunities are made up easier than losses.

It’s not necessary to play every day; it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.

4.) Emotion is the enemy when trading.

Emotional decisions have a way of coming back to haunt you. If you’re personally attached to a position, your decision-making process will be flawed. Take a deep breath before risking your hard-earned coin. See related link.

5.) Zig when others zag.

Sell hope, buy despair and take the other side of emotional disconnects. If you can’t find the sheep in the herd, chances are you’re it. (more…)

Trading quotes

  
  Education
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And the great sea with its friends and its enemies. And bed, he thought. Bed is my friend. Just bed, he thought. Bed will be a great thing. It is easy when you are beaten, he thought. I never knew how easy it was. And what beat you, he thought. ‘Nothing’, he said aloud. ‘I went out too far.’

– Hemingway, The Old Man and the Sea

‘At that point I ought to have gone away, but a strange sensation rose up in me, a sort of defiance of fate, a desire to challenge it, to put out my tongue at it. I laid down the largest stake allowed – four thousand gulden – and lost it. Then, getting hot, I pulled out all I had left, staked it on the same number, and lost again, after which I walked away from the table as though I were stunned. I could not even grasp what had happened to me.’

– The Gambler, by Fyodor Dostoevsky

If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time.

– Chinese Proverb

Luck never gives; it only lends.

– Swedish Proverb

Depend on the rabbit’s foot if you will, but remember it didn’t work for the rabbit.

– R.E. Shay

Building a Winning Momentum

  
  Education
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History has recorded many great winning streaks.

Whether they were made in business, team sports, individual sports or other areas, they all had some common characteristics. They had a strong foundation, a belief in what they were doing and they took it one step at a time.

In trading, we can develop a winning streak if we decide to not always categorize winning with profits.

Success brings about more success, however if we decide we are a failure, then failure can also bring about more failure.

The Technical Aspects of Trading Emotions- Anirudh Sethi

  
Analysis, Education
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Image result for Trading EmotionsEach seminar and book will disclose to you that controlling your feelings and have taught in your trading are fundamental to your prosperity. In any case, nobody reveals to you how to accomplish passionate control and individual teachers while trading the market. Each trader sees the market distinctively in light of the fact that our past, our present lives, and our discernments are special. Understanding those things about yourself and tackling their impact on your trading will enable you to continue trading substances free of enthusiastic flotsam and jetsam. Here are a few stages that will have any kind of effect. You should adopt a specialized strategy to your feelings and teach preparing similarly as you adopt a specialized strategy to dissecting a stock outline. However, before we get into the coordination of how to control feelings, you should see a few rudiments of why some market members have strong control of their feelings while others don’t. Experience considerable difficulties recently? Is it true that you are getting a handle on worried about it? Assuming this is the case, you may find that a lot of the proposals you ordinarily get to enable you to the center are not doing a mess of good. You have been adhering to your trading technique as well as can be expected and endeavoring to trade with train, yet things still are not working out. You continue losing trades in any case, and you have a feeling that your entire basic leadership handle is a wreck.

Trading Emotion is Required to Understand Market Vibrations

All value activity in stocks is fundamentally reliant on enthusiastic responses from differing market members. Without feelings, cost sits level. There are numerous degrees of passionate surges, influxes of happiness and covetousness, and floods of frenzy and sadness that drive costs up or down. What’s more, dependable inside those waves are the executioner tear tides that originate from the individuals who have figured out how to control feelings and wipe out the individuals who don’t have control. At last, achievement in the market is a mix of foreseeing the following move and the moves of the various market members who may enter that stock, and decide when you ought to take an interest. Shockingly, most traders trade the market not as though they were playing chess with the many-sided quality of the game of poker. However, they were in Las Vegas, betting on a roulette wheel. On occasion this way, you now and then need to handle the intense subject matters which are throwing you off track before you begin managing specialized parts of the circumstance. Possibly you are making blunders with your trading framework and how you utilize your pointers, yet you might not be able to settle those mistakes in your present mental state. You just can’t see obviously when your brain is a jumble of enthusiastic debris. In the event that that is your circumstance, I prescribe that you went through an enthusiastic agenda before you proceed. You should recognize any enthusiastic injuries which might be meddling in your trading, and afterward, make sense of regardless of whether those injuries are no less than one reason for your present issues. In the realm of stock trading, there are Master Traders who have control over their feelings and after that, there are the Gambler traders who purchase and offer construct absolutely with respect to feeling whether they understand it or not. A Master Trader joins the expertise of a chess player who envisions a rival’s moves and plans his own particular well ahead of time and furthermore utilizes the poker player’s reign in never uncovering his hand he uncovers it. A card shark is basically responding to his feelings without rationale or thinking ahead in what he does. Market members who trade the market with the ability of a Master Chess Player–anticipating value activity days, weeks, and months ahead of time; fusing the ‘never uncover your hand’ part of poker–have the extraordinary favorable position over speculator traders. They have control over their feelings and thus control over how they trade. The card shark trader is simply tossing money at the market and trusting something will go their direction. (more…)

The way to learn

  
  Education
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Learning to trade is not very different from learning any other discipline. It takes a lot of efforts and finding the right teachers. At some level of experience, the best teacher for you will be you, but before such level is reached having someone to show you the direction of least resistance is priceless.

For example, in his early years, one of the most notorious composers ever –  Mozart, imitated and mimicked the work of others. From their lessons, later in his life, he gradually builds his own unique style. This is a common path to success in music. Common path to success in trading.

In music first you learn the notes. Then you try to replay other guys’ compositions until one day you start to compose in your own unique style. In trading, first you learn the basics of supply and demand, some common market anomalies and basic market psychology. Then you read about other, already successful, people’s methods and try to mimic them until one day you become experienced enough to create your own style of trading that satisfy you financial and personal goals best. These are three different levels of expertese in each field and they should be mastered in the mentioned sequence.

What Happens in Your Brain When Your Market View Is Completely Wrong

  
  Education
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Eric Barker has a new article (link here) on how to win every argument. The article had a point which made me think whether the same situation happens in trading.

So it quoted an experiment by psychologist Drew Westen, which showed to supporters, footage of their favorite candidates completely contradicting himself. The experiment found that as soon as the people realized that the information contradicted their world view, the parts of the brain that handle reason and logic went dormant, while the parts of the brain that handle hostile attacks – the fight-or-flight response – lit up. Essentially logic gets thrown out the window, and it just becomes a fight where you do anything to win.

A similar situation occurs in trading, when you have a certain expectation of how the market should behave. E.g. you might for various reasons, think that the market will go up. So when the market does not follow what you expect, you might initially make up excuses for it. However when the market continues to go completely in the opposite direction of what you expect, your logic and reasoning centers would shut down, your fight-or-flight response kicks in, you treat it like a hostile attack on you, and you would do anything to win (or not lose), e.g. keep averaging down. I’m sure this sequence of events led to many traders blowing up their accounts. It is pretty interesting that the experiment showed this as a ‘natural expected’ behavior.

As always, trade what you see, not what you think.

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