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A Good Trade -One Liner

  
  Education
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  • A good trade is based on your trading plan; a bad trade is based on emotions and beliefs.
  • A good trade is based on your own personal edge; a bad trade is based on your opinion.
    • “A trader should have no opinion.  The stronger your opinion, the harder it is to get out of a losing position.”  -Paul Rotter
  • A good trade is made using your own time frame; a bad trade changes timeframe due to a loss.
  • A good trade is made in reaction to current price reality; a bad trade is made based on personal judgment.
    • Your plans can make you money because you’re not trying go predict what will happen; you’re adjusting in real time to what is happening.
    • Always trade in the direction of the longer-term trend of your time frame where the easiest money is located.
  • A good trade is made after identifying and trading with the trend; a bad trade fights the trend.
    • “The answer to the question, ‘What’s the trend?’ is the question, ‘What’s your timeframe?”  -Richard Weissman
  • A good trade is made using the trading vehicles you are an expert in; a bad trade is when you trade unfamiliar markets.
    • In the markets you will see that money flows from those who have not done their homework to those who have”

Psychopaths

  
  Education
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Every once in awhile the wrong person ends up working at a Wall Street firm and lives to tell their story upon exiting.

Ben Younger, the auteur behind the 2000 film ‘Boiler Room’ had, in fact, trained at one – the film is more autobiographical than you might have thought. he was an outsider and it didn’t take him long to realize what was going on around him. My own experiences have been chronicled here and in my book – it had taken me too long to realize that I couldn’t be a “good broker” no matter how hard I tried because the entire business model is set up to reward conflicted action and avarice – he with the least scruples and fear of regulators wins.

This weekend we hear from former Lehman Brothers trader Nicholas Chirls. Nichols worked at the epicenter of credit bubble psychosis in the 2007-2008 period and was every bit as out of place as I was, mainly owing to his possession of a soul and priorities other than compensation… (more…)

Trading Emotions

  
  Education
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Confidence Without confidence it is not possible to achieve much in other streams of life. In the equity markets, it is doubly true. If you lack in self-confidence, doubts may creep up in your mind. This may lead to indecision, which in turn lead to missed opportunities and losses. For day-trading and short interval trades, confidence is of utmost importance.On the other hand, on down days be careful. In many instances, you may be tempted to book small profits just to make your day balance sheet look pretty. This is not the issue. When you are faced with loss-making trades sooner or later, that same daily balance sheet will not look pretty at all.Never be far away from the correct principles of trading no matter what your mind is tempted to think. It is just too painful to reinvent the wheel.
Discipline
In order to be a successful investor/trader, you must be very disciplined. Stick to the plan of action. This means that you will stick to trading policies, trading plans and so on. Know your objective and work accordingly.
Ideas
Do not seek to implement new ideas that come all the time during markets. Remember, ideas are just ideas. If you feel there is value in them, they have to be thought about, refined, tested and then brought to the trading room. If you try to implement new ideas immediately to trading all you will do is to erode capital and confidence.
Hope
Do not allow hope to loiter anywhere close to your trading system. Hope has the potential to do maximum damage to your capital.

Make Friends

  
  Education
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The trend is your friend. Trading is like swimming. You can swim with the current or against it. In a survival situation, you can swim with the current forever. Outside factors such as water temps, need for food and sleep are another matter, but as for pure swimming ability you could swim with a slow or strong current forever.

Not so with swimming against the current. You will eventually tire and drown. That is an absolute certainty. Unless you find intricate ways to reserve kinetic energy and escape the current’s ravage for periods of respite, you will die. The same concept is true for trading with market direction versus against it. If I only had Rs 10000 for every person I heard say, “I’m a contrarian… I don’t follow the herd” through the past fifteen years, I’d have Rs One Crore for free money right now. Any idea where all those market contrarians are today? Other professions than trading. (more…)

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