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Trading in the Zone with these 12 steps

  
  Education
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The 5 Fundamental Truths of Trading:

1. Anything can happen.
2. You don’t need to know what is going to happen next to make money.
3. There is a random distribution between wins and losses for any given set of
variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing
happening over another.
5. Every moment in the market is unique.

The 7 Principles of Consistency:

1. I objectively identify my edges.
2. I predefine the risk of every trade.
3. I completely accept the risk or I am willing to let go of the trade.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success
and, therefore, I never violate them.

The 14 Stages Of Trader

  
  Education
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1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy a stock.

2. EXCITEMENT – Things start moving our way and we get giddy inside. We start to anticipate and hope that a possible success story is in the making.

3. THRILL – The market continues to be favorable and we just can’t help but start to feel a little “Smart.” At this point we have complete confidence in our trading system.

4. EUPHORIA – This marks the point of maximum financial risk but also maximum financial gain. Our investments turn into quick and easy profits, so we begin to ignore the basic concept of risk. We now start trading anything that we can get our hands on to make a buck.

5. ANXIETY – Oh no – it’s turning around! The markets start to show their first signs of taking your “hard earned” gains back. But having never seen this happen, we still remain ultra greedy and think the long-term trend is higher.

6. DENIAL – The markets don’t turn as quickly as we had hoped. There must be something wrong we think to ourselves. Our “long-term” view now shortens to a near-term hope of an improvement.

7. FEAR – Reality sets in that we are not as smart as we once thought. Instead of being confident in our trading we become confused. At this point we should get out with a small profit and move on but we don’t for some stupid reason.

8. DESPERATION – All gains have been lost at this point. We had our chance to profit and missed it. Not knowing how to act, we attempt to do anything that will bring our positions back into the black.

9. PANIC – The most emotional period by far. We are clueless and helpless. At this stage we feel like we are at the mercy of the market and have absolutely no control.

10. CAPITULATION – We have reached our breaking point and sell our positions at any price. So long as we can get out of the market to avoid bigger losses we are content.

11. DESPONDENCY – After exiting the markets we do not want to buy stocks ever again. The markets are not for us and should be avoided like the plague. However, this rare point marks thepoint of maximum financial opportunity.

12. DEPRESSION – We drink, cry and/or pray. How could we have been so dumb we think to ourselves. Some start to correctly look back and analyze what went wrong. Real traders are born here, learning from past mistakes.

13. HOPE – We can still do this! Eventually we return come to the realization the market actually does have cycles (shocking). We begin to start analyzing new opportunities.

14. RELIEF – The markets are turning positive again and we see our prior investment come back around. We regain our faith (although small) in our ability to invest our money. The cycle start all over again!

Visualise and Be Motivated

  
  Education
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cat lion mirrorFirst, visualise the bad habits that you had. How do you feel? Terrible? Fuel with regrets? Uncomfortable? Now, make a note of the negative emotions and remind yourself how badly you want to get away from it.

Next, visualise the new but good habits that you intent to acquire. Again, how do you feel about it? Excited? Energised? Happy? If so, make a note of the positive emotions and compare it with the negative ones.

With that, do you feel motivated to change? I hope the answer is yes. And make sure to apply the same technique frequently to remind yourself that you really want to change.

Why Trading is Difficult

  
  Education
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 CoverOvercomingDifficultTimes1. Need to internalize lots of trading simulation of specific set-ups in real-time to trade effortlessly
 2. Need to trust money management system to weather +10 losses in a row
 3. Tuff to internalize that its the 5-6 huge monthly runners that is the big pay-off days
 4. Must master +3 trade set-ups to make money consistently month to month.
 5. It takes considerable time to mathematically think and act like a trader
 6. Trading is a performance skill which requires mastery of every element of trading
 7. It requires time capital and considerable effort to achieve the experience to make it effortless and automatic (more…)

Ireland Rescue Imminent As Bund Spreads Pass 720bps

  
  Education
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At last check Irish-Bund spreads were north of 725 bps, meaning Ireland is now effectively insolvent, and joins Greece in the group of bankrupt European countries. If this blow out is not stopped immediately, the contagion will again spread to the periphery first and then to the core shortly thereafter. The only question is when, just like in the case of oh so coy Greece, will Lenihan admit defeat and ask the IMF and the ECB for help (oh, and do it so during a Citigroup-mediated conference call). However, as Market News reports, citing Handesblatt, the Irish rescue may be imminent, and may come as soon as today.

From Market News:

 
 

Eurozone governments are preparing for a possible Greece-style rescue for Ireland although the country has not yet asked for financial assistance, German daily Handelsblatt reported Thursday, citing German government sources.
 (more…)

The Pitfalls of Speculation

  
  Education
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The question at once asks itself: “How may the top of the market be discerned, and the dangers of the eleventh hour be avoided?” The answer is more or less complex.

It is, of course, necessary above all things to revert to the estimated and fixed value of the stocks traded in and to find out how much above this normal point the securities are selling. This done, common sense, plus prudence, and minus piggishness, may determine the question and dictate the time for liquidation. This action, however, once decided upon must be adhered to with great rigidity, for thousands of traders who thus take time by the forelock have been dissatisfied afterwards by seeing a still greater advance in which they had no interests, and through greed and impatience have re-entered the lists at a most inopportune time.

The trader who realizes his profits, and sees a further advance following his own withdrawal from the market, may console himself with the fact that he has made and secured a profit; that trying to guess the exact extreme of a cycle is hazardous, and that the advance which followed his withdrawal is unsound, being founded on speculation rather than valuation.

But this is a digression from the technical phase of the matter.  So far as it is possible to judge the culmination of the speculative campaign by extraneous appearances, it may be said that a long period of backing and filling, a swinging back and forth of prices at the approximate high level marks the beginning of the end.

The definition of the “top” of the market is that point at which the great traders have almost in unison decided to unload, and per contra, the public has reached its highest level of enthusiasm.  At the beginning of this period the insiders possess and enormous aggregate of stocks which must be sold in such a manner as not to break the market. This operation will take weeks, or even months to accomplish, as any precipitate selling would be disastrous.  The wise element, therefore, sells all the market will absorb without any severe decline, and ceases selling, or even takes the buying side at the first sign of any “softness.” In short, they do all they can to maintain a good feeling and high prices, at the same time parting with the securities as rapidly as possible.

This statement may convey the impression that the shrewd speculators act in unison.  This is true, but not necessarily in the sense that there is any preconceived arrangement between them.  The unison or more or less unconscious, and is founded on the fact that there are only two sides to the market, the right and the wrong side, and that those of the speculative world who have sufficient wisdom and experience to know what is right are working to the same end, while all the inexperienced or unthinking horde are working on theories diametrically opposed to reason or even probability. 

From the SAME AS IT EVER WAS files:

The Pitfalls of Speculation by Thomas Gibson, 1906.

 

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