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10 Things that each Trader Must Master

  
  Education
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THE THREE M’s: Mind (psychology), Method (a trading edge) and Money (risk or money management).
But what does each of those things mean? Many of these answers came from other great traders sharing their wisdom in books and my own successful trading through all types of markets with bigger and bigger accounts that created a need for me to up my game and get better and better.
Mind (psychology) You must have the right winning mind set to make it in trading.
Discipline to follow your trading plan.
Perseverance to keep going through the losing periods.
Faith that your trading method works. (more…)

Why Trading Is A Performance Sport

  
  Education
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MB-TEAM

Learn about various trading software
Learn how to interpret candlestick charts and patterns
Learn Fib extensions and retracements
Try-out various time frames
Learn trade executions
Learn how to manage trades
Learn about emotional control and psychology
Learn about risk control
Devise a precise trading method
Learn about money management
Backtest set-up for several months
Internalize set-ups by paper trading
Have to be adequately capitalized
Specialize in gap trading
Learn about creating a daily watch list
Learn how to prioritize a daily hit list
Set up blog for recording daily diary of ideas and thoughts
Devise a system to analyze trading results – daily and monthly
Develop a daily precise routine

 

Trading Do's and Dont's

  
  Education
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  1. Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.
  2. Buy the first pullback from a new high. Sell the first pullback from a new low. There’s always a crowd that missed the first boat.
  3. Buy at support, sell at resistance. Everyone sees the same thing and they’re all just waiting to jump in the pool.
  4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.
  5. Don’t buy up into a major moving average or sell down into one. See #3.
  6. Don’t chase momentum if you can’t find the exit. Assume the market will reverse the minute you get in. If it’s a long way to the door, you’re in big trouble.
  7. Exhaustion gaps get filled. Breakaway and continuation gaps don’t. The old traders’ wisdom is a lie. Trade in the direction of gap support whenever you can.
  8. Trends test the point of last support/resistance. Enter here even if it hurts.
  9. Trade with the TICK not against it. Don’t be a hero. Go with the money flow.
  10. If you have to look, it isn’t there. Forget your college degree and trust your instincts.
  11. Sell the second high, buy the second low. After sharp pullbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try.
  12. The trend is your friend in the last hour. As volume cranks up at 3:00pm don’t expect anyone to change the channel.
  13. Avoid the open. They see YOU coming sucker
  14. 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom.
  15. Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it.
  16. Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.
  17. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action.
  18. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.
  19. Bottoms take longer to form than tops. Fear acts more quickly than greed and causes stocks to drop from their own weight.
  20. Beat the crowd in and out the door. You have to take their money before they take yours, period.

13 Things- Learned About Humans and the Financial Markets

  
  Education
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  1. Predictions do not work as tomorrow is uncertain. We will only boast about things we have predicted right and talk nothing about the other half we got wrong.
  2. Skills can bring us moderate success. However, luck is needed to be a big success. (credit to Jon)
  3. We tend to credit our successes to good skills and blame our failures on poor luck.
  4. Some of us rely on luck (most unknowingly) by investing for high returns (and losses). A few of us will make big money but most of us will end up much poorer.
  5. Some of us deliberately limit the luck factor by choosing investment products with capital guarantee and guaranteed returns. None of us will make big money but none of us will be very much poorer.
  6. We need to know how much we can afford to lose (financially and emotionally) before deciding to be No. 4 or No. 5, or somewhere in between.
  7. We have many biases. The degree of success in investing or trading depends on how much we can keep our biases in check. No, we cannot remove our biases totally.
  8. Confirmation bias – we see what we want to see. We seek out evidence to validate our investment decision and ignore those that suggest otherwise.
  9. Availability bias – we are influenced by the things we observe. If people we knew made a lot of money through property investment, we will think that properties are the best investments in the world and develop a preference for it.
  10. Loss aversion bias – we want to be compensated for high returns before we decide to take the risk to invest. We often wait for markets move and show high returns before we want to invest. We are not interested if markets are not moving.
  11. Hindsight bias – we tend to say “I knew it” after an event has happened.
  12. Survivor-ship bias – we only get to hear stories of successes but many stories of failures were untold.  See No 2 and No 3.
  13. Most us do not know what we want in life. We think we will be happier with more money.

How to Become a Disciplined Trader

  
  Education
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  1. The psychology of price movement
    • The market prices flow back and forth like a tug of war between those who believe and expect the market to go up–and consequently buy–and those that believe the market will go lower–and consequently sell.
    • This means for one side, in their minds, that “the market” will make them winners; their beliefs will be validated.  All the traders on the other side, however, will be made losers; they will feel the market took something away from them and will naturally be disappointed.
  2. The steps to success
    • Once you trust yourself to always do what needs to be done, there will be nothing to fear because the markets won’t be able to do anything to you, as a result of your inability to respond appropriately.
    • Second, by passing up other opportunities that you are not an expert at yet, you will be releasing yourself from any compelling desire to trade.  Any compelling behavior is usually the result of some fear.
    • Staying focused on what you need to learn–> Deal with losses–> Become an expert at just one market behavior–> Learning how to execute a trading system flawlessly–> Learn to think in probabilities–> Learn to be objective–> Learn to monitor yourself
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