• Think in terms of probable outcomes, not 100% accuracy. You will be 6 feet under before you achieve the latter.
• Fester over turning points that produce yield. A market turning point or inflection zone is worthless to most people unless it is followed by a price movement that pays off relative to your risk.
• Work in numbers, not aesthetics. Save the cute charts for the powerpoint team.
• Good value propositions are found in all markets. The best investors on planet earth have learned to identify significant value and take advantage when it is present.
• Wait until reality slaps you in the face prior to thinking you are the smartest person in the room.
• Until it’s proven, it’s just a hypothesis.
• No, you shouldn’t be taking that trade ahead of the data release.
• Analysts and economists risk nothing but their reputations.
• Beware of the people that always have a strong opinion. Unwavering systems of belief are far more susceptible to loss than those willing to accept alternative outcomes.
• What is plain-to-see rarely works in the real world.
• You are passing on all the good trades and taking all the bad ones because your strategy lacks a winning percentage in alignment with your expectations.
• Markets are primarily driven by the expectation or surprise of fundamental news and data. And governments.
• Conspiracy theorists get stopped out 99.99999999% of the time. Subjects of “The Big Short” entertain us because they are as rare as a total solar eclipse.
• Build your strategy by working backwards. This industry significantly lacks emphasis on exit strategies. A strong price magnet relives concerns about risk and pressures on pinpointing entries.
• Governments are oftentimes poor judges, giving passes to those big enough to pay a legal settlement. Do your homework and make sure your money is in good hands.
• The best trading strategy ideas are on websites that lack images of Ferraris, sailboats, beaches or mountains.
• If you’re afraid to use it, don’t. Your brain has already pronounced the outcome.
• People that instantly make you feel good usually aren’t the ones taking you to the next level.
• In all cases, people, thus prices, are drawn to heavy order flow like bees to a hive.
• When someone asks you, “what’s the trade logic”? You should be able to answer in under 30 seconds.
• Just because an entry looks good doesn’t mean everything that follows is going to be good, too. Trading for one or two ticks on a retail platform is the ultimate waste of time and money.
• Always work with the end in mind. The best portfolio managers fester over performance metrics first, because that’s all that matters in the end.
• If you stink at managing risk, you will always lose until you figure this out.
• Drawdown is another way of saying “you were wrong”. Focus on what’s right about the situation, not where you went wrong. Look at your valleys and and see what’s going on there, not your flawed points of entry.
• Avoid money-making buzzwords in the same way you would a psychopath who’s foaming at the mouth and running after you with a chainsaw.
• Commissions, spreads and fees should be treated like a chronic disease. Learn to live with them but don’t let them stop you from moving forward.
• Writing a trading plan in your early career is the equivalent of a toddler drawing a stick figure. Realize it will get better in time but by no means treat it as an end result.
• Trading plans should be renamed Risk plans. Because that’s all that matters in the end.
• Your strategy should consist of a parameters that produce a clean return distribution, with the peak being as long as possible, and the valleys keeping the strategy afloat during various trading environments.
• It doesn’t matter what you trade or how you trade it. If it works, it works.
• If you can’t get a favorable result with plain Jane parameters, odds are the exotic ones are going to blow up down the line. This is the epitome of over-optimization. Parameters need to fall with in a group with specific ones producing better outcomes than others, but all keeping the ship afloat.
• All instruments consist of different levels of liquidity. Liquidity drives more market versus limit orders being used. These have a direct effect on the types of price movements they exhibit. Treat them all differently, because they are.
• None of us are born dumb. Society makes us that way.
• Funnel your dopamine addiction to something that adds value, like actionable research. Clicking buy and sell buttons should not be your “rush”.

(more…)