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10 New Lessons For Traders
10) Those who are willing can be taught almost anything.
9) Great people want to help others achieve great success.
8) Success in business requires tremendous concentration. Outside distractions must be avoided.
7) Sometimes it is best to leave politics to politicians.
6) Everyone fails at some point in his life. The true winners rebuild after their failures.
5) To put on a trade when everything is going against you requires character and commitment.
4) Rules are rules. Stick to them.
3) Adapt with the times. Be willing to be malleable.
2) Always leave yourself outs. Never commit everything to one position or to one person.
And the number one lesson:
1) The market is bigger, stronger and badder than you. Always respect it for the beast it is.
Russell Sands on What Causes the Market to Move.
Russell Sands was one of the original “turtles” trained by the famous commodity trader Richard Dennis. Dennis believed that commodity traders could be trained, as opposed to a colleague who believed great trading was an innate ablility. To settle a bet, Dennis placed ads in trade magazines and interviewed hundreds of candidates, eventually choosing 32 trainees. The new traders were named turtles, after the turtles Dennis saw being raised on a farm in Singapore.
By the way, if that story line sounds familiar, you may have seen the movie Trading Places, starring Eddie Murphy and Dan Akroyd. And for my only movie review on this site, I give it two thumbs up. Very funny. (more…)
A profile of natural gas trader John Arnold -Must read
You could hear John Arnold trying to choose his words carefully. Seated at a conference table inside a drab government building in Washington, D.C., in August, Arnold hardly fit the stereotype of a swaggering, 35-year-old billionaire natural-gas trader.
He wrung his hands as he waited to speak and twisted his wedding band. He filled, and refilled, and re-refilled his water glass. Then he stuttered a bit before he gained momentum and politely advocated rules that would restrict others while allowing him to keep doing what he does.
It was a rare public appearance for one of the least-known billionaires in the U.S. But the stakes were high. Arnold was testifying at a hearing of the Commodity Futures Trading Commission (CFTC).
Jesse Livermore's Biography – Graphic
William Eckhardt Quotes
Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return.
Partner of perhaps the best-known futures speculator of our time, Richard Dennis.Created the famous trading group known as the Turtles. William has averaged over 62 percent return. “I take the point of view that missing an important trade is a much more serious error than making a bad trade”.
”Buying on retracement is psychologically seductive because you feel you’re getting a bargain versus the price you saw a while ago. However, I feel that approach contains more than a drop of poison.”
”You shouldn’t plan to risk more than 2 percent on a trade. Although, of course, you could still lose more if the market gaps beyond your intended point of exit.”
”I haven’t seen much correlation between good trading and intelligence. Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.”
”The answer to the question of whether trading can be taught has to be an unqualified yes. Anyone with average intelligence can learn to trade. This is not rocket science.”
”If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.”
”Watch idly while profit-taking opportunities arise, but in adversity run like a jackrabbit.”
”One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits.”
”What feels good is often the wrong thing to do.”
”Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”
”Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.”
”Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.”
”It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with ‘their money’. We are sure you have heard this. Once you have profit, you’re playing with ‘their money’. It’s a comforting thought. It certainly can’t be as bad to lose ‘their money’ as ‘yours’? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”
Money solves all of your problems.
It is often said, trading introduces you to yourself. I was in my second year of trading when I heard that phrase. She would go on to ultimately teach me much about life and myself. The benefit of being in my early 20′s and teaching people in their 40′s and 50′s. I helped them with trading, they helped me grow up.
What that phrase means is that who ever you are that day will show up in your trading. This of course comes in varying degrees.
In many professions your emotional state may not effect your earnings or employment. In trading, a “bad” day can create a cascading effect. You lost when you should have made money. You created a bad habit. Losing doesn’t trigger the right response, etc.
A trader views the market through themselves. Now, most of the time it is little things that can be easily passed over. Human beings are always going to have to deal with things they rather would not have to. Every person has a bad day. (more…)
Knowledge or Feelings
3 Steps to Controlling Emotions and Gaining Trading Discipline
1. Know what you are going to do before you do it.
A Master Chess Player is at least 6 moves ahead of his opponent at every step in the game of Chess. A Master Trader identifies the market participants in that stock at that moment, determines when the next level of market participants will buy, decides a specific price for entry, and has one or more exit strategies planned for that stock trade before he ever places an order. In other words: he knows what he is going to do before he initiates the trade and has all of his various strategies worked out for all the different scenarios that can happen to that trade. He is prepared for all situations and ready to trade.
2. Develop your own unique Trading Style.
Too often traders simply follow the crowd. Instead you should develop your own unique trading style. A trading style is not a strategy. It is a set of parameters or rules that you adhere to strictly, ignoring rare anomalies that occur in your trading from time to time that go against your rules. Your trading style should also ignore gimmicks, fads, and ‘hot new strategies’ that are constantly being promoted to crowd traders. If you establish a set of parameters for your trading, write those rules down, and follow them while ignoring the crowd mentality of most small retail traders, you will begin to establish strong emotional control in your trading decisions. The trick is writing the parameters down and then sticking to those rules. Emotions want traders to ignore rules.
3. Ignore the Money.
Don’t trade for the money. Trade because you can’t imagine doing anything else. Trade because it is the most enjoyable and rewarding profession you can do. You can have a passion for studying charts without letting passion rule your decisions. Highly successful people, in any career, do not do their job because of the money, they do it because they love what they are doing and can’t imagine doing anything else. The money is secondary to doing the job that gives them purpose and self-esteem. Money is not the ultimate motivator, purpose and self-esteem are.