11 Common Errors

1. Placing a limit order in and then leaving the screen and not canceling the limit when you wouldn’t want it to be filled later or some news might come out and get you elected when the real prices is a fortune worse for you
2. Not getting up or being in front of screen at the time when you’re supposed to trade.
3. Taking a phone call from an agitating personage, be it romantic or the service or whatever that gets you so discombobulated that you go on tilt.
4. Talking to people during the trading day when you need to watch the ticks to put your order in.
5. Not having in front of you what the market did on the corresponding day of the week or month or hour so that you’re trading for a repeat of some hopeful exuberant event which never happens twice when you want it to happen.
6. Any thoughts or actual romance during the trading day. It will make you too enervated or too ready to pull the trigger depending on what the outcome was. Continue reading »

Optimism as a Default Setting

We begin with a story from one hundred years ago…

From My Favorite J.P. Morgan Story by Mark Skousen:

In the early days of the Twentieth Century, when J.P. Morgan ruled Wall Street, a visitor came to the City. He was a long-time friend of Morgan, a commodity trader from Chicago. He was what might be called a “perma bear” following the Panic of 1907. No matter how high or low the stock market went, his outlook was pessimistic. Another crash, panic and depression were just around the corner.
This was his first visit to thew world’s greatest city. He arrived at 23 Wall Street, and was ushered into J.P.’s spacious office overlooking the Exchange on one side and George Washington’s statue on the other.
They immediately began talking about the markets, Morgan being bullish as ever, and his commodity friend being as bearish as ever. “J.P.,” he said, “the news overseas doesn’t look too good.”
“A buying opportunity!” responded Morgan. Continue reading »

Some behaviors that virtually guarantee losses in the markets

Lack of discipline: It takes an accumulation of knowledge and sharp focus to trade successfully. Many would rather listen to the advice of others. They just want to believe, like Fox Mulder.

Impatience: Some have an insatiable need for action. The day trading adrenaline rush and the gamblers’ high can have heroin-like addiction pull.

No objectivity: Some are unable to disengage emotionally from the market. They create a virtual “lifelong” marriage to their trades. Divorce is not an option.

Greed: A desire for quick profit blinds many from the diligent work needed to actually win in the long run.

Refusal to accept truth: Some do not want to believe that the only knowable truth is price action. They feel more secure following cult leaders serving Kool-Aid.

Impulsive behavior: Many jump into investments based on the morning paper or Good Morning America. Thinking that if you act quickly, somehow you will beat everybody else in the great race is a recipe for a messy failure.

Inability to stay in the moment of now: To be a successful trader, you cannot spend your time thinking about how you are going to spend your profits. Trading because you have to have money is not workable.

Stay open-minded: Come into the day knowing your future steps. Do not be stubborn when the market does not go your way. Cut your losses and follow your stinking trading plan.

Avoid false parallels: Just because the market behaved one way in 1995, 2000, or 2008 does not mean a similar pattern today will give you the same result. A great example of this: The Hindenburg Omen. It is a technical analysis pattern that is said to portend a stock market crash. The problem: Sometimes it is right, sometimes not. You don’t want to bet your life savings on a coin flip.

The Gods are Human

Idolization is a basic function of human nature.  I don’t think it has to be proven any more.  From the little child that looks up to his or her older sibling or parent, to the full grown man sitting down on any given weekend watching his favorite sports figure in a state of awe, we all seem to idolize someone.  In my case any one of Jack Schwager’s personalities mentioned in his “Market Wizards” books,  Jessie Livermore, or any number of not so popular yet successful traders such as Chris Lori or Carolyn Boroden.  To distort Dylan’s words:  “it might be the devil, it might be the lord but your gonna have to <idolize> some one”.

In our natural idolization we forget that these extraordinary people are after all just people.  Even though in many cases they have been able to accomplish extraordinary things, in the end they are subject to the same influences to which we are subjected.  Though it may be hard to believe at times, yes they all put their pants on one leg at a time.

What the heck does this have to do with trading?  I’m glad you asked.

I notice that our trading terminology is littered with idolized lingo.  We talk of “smart money”, “institutional investors”, “market makers”, and such.  When we talk of these folks it’s as if they are gods that are somehow immune to the effects of human nature such as fear and greed.  I believe that it’s not so much that they are immune, as it is that they have learned to subdue and control their reactions.  They are active thinkers, not reactive thinkers.  Even then, they do all they do in a human body, with a human mind, that has human constraints and habits.

This tells me that even the “smart money” or the “institutional investor” is subject to patterns in his thinking and behavior.  The smartest of money managers goes to sleep at certain times of certain days of the week and is trading at certain times of the day.  Institutional guys have to create and deal with the markets patterns and behavior within the constraints of their own daily routines.  This creates opportunity for those willing to sit back and try to think about it. Continue reading »

Trading Strategy for Nifty Future -03rd March’10

NF-ICON

There is a meaningful difference between trading to win and trading to not lose. The average person feels more psychological pain over a loss than they feel pleasure over a gain–particularly once they have already “booked” that gain mentally. If I’m expecting a bonus from my employer, I’ll be happy when I receive the paycheck–but I’ll be much more upset if I find out the bonus has been rescinded.

We can never eliminate loss from life or trading; nor can we repeal the basic uncertainties of markets. What we *can* do is develop an edge in the marketplace and, over the course of many trades, let that edge accumulate in our favor.

And, if you’re trading well, maybe that losing trade will offer you a fresh perspective about how the market is trading: an insight that can make you money the next time around. Then it’s not a loss. It’s information that you’ve paid for.

Good Day

Yesterday it was written Inverse Head & Shoulder indicates target of 5045 level.

-It made a high of 5035 & closed at 5023 level.

Never broken 4798-4782 & nonstop rally is continued.Trade with eye open and use commensense.

-Two consecutive close above 5025 level will take to 5144-5184 level.

-From recent low of 4667 this is 3rd wave (Target 5057)

-Inverse Head & Shoulder formation (Target 5045)

chess-strategy

Thirsty Traders ,Just concentrate on levels.

5039-5045-5057 are Hurdles.

-Bollinger Band indicates to have cautious approach.

-Save this :In a day or two will see sharp Intraday fall and it will be panic like position.

-Sell 5000-5100 call.

Buy 4900-4800-4700 puts.

ALERT

Rising Wedge on chart indicates rally may continue upto 5100-5150..No worry @ all.But vertical fall too not ruled out.

3& 7 DEMA will act as support levels.

I will update more to our Subscribers.

Updated at 7:42/3rd March/Baroda