Instead of cutting a loss the trader holds it stressing over it for the rest of the day or a week. This destroys the trader’s mental capital and inflicts completely unnecessary emotional pain. The first loss it the best loss.- A trader that trades their opinion instead of the price action has a lower success rate than someone who just trades price action. The vast majority of traders make money by following trends and chart patterns not their own opinion.
- A trader who puts on the one big trade that they think they just can’t lose on is usually the one that blows up their account. A trader must always have stops and must always manage risk regardless of their belief in any one trade.
- Believing that you are right about a trade and the market is wrong is a sure path to destruction. The market is always right because price is reality. How do we know when we are wrong? We lose money that is proof enough.
A trader who endlessly searches for stock picks and predictions instead of learning how to trade a robust method while managing their own mind and using risk management is doomed to failure.
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Trading is all about YOURSELF
Trading has to do a lot with yourself. Trading is not about the market.
You have to get your emotion and psychology right before you go to trade. Without the good emotion or feeling of the day, you will be most likely be losing during that day.
Do Not Trade, If …
– You cannot afford to lose the money. (Prepare to lose)
– You have a Bad day (quarrel with wife/child/boss).
– You are Sleepy
– You are Not comfortable in trading
– Technology failed You
Do not be afraid that you will lose the opportunity for the ride up or down. There are plenty of opportunity out there in the market everyday.
Remember: If you trade, you will lose money. If you don’t trade, at least you wont lose money.
The funny thing that i found out … People will lose money if they care about their money but people will make money if they don’t care about the money.
Get yourself right first and the money will come to you.
Do You Have An Open Mind?
I wouldn’t multi-task while watching this video…
Traders U Should …Filter the noise
Trading Plan :10 Points
The Trading Plan comes first and should account for the following parameters:
1. Entering a trade. Quantified approved entries.
2. Exiting a trade. Predetermined Exit point BEFORE you enter a trade.
3. Stop Placement. How will you know you were wrong about a trade? A stop loss, trailing stop, chart signal, volatility stop, time stop, or target price.
4. Money Management. How much capital will you risk on any one trade? This is the key to position sizing.
5. Position Sizing. How much capital will you put on any one trade? Do you have rules that tell you to trade bigger or smaller based on the odds?
6. What to Trade. What qualifies stocks to be on your watch list?
7. Trading Time Frames. Are you going to day trade or position trade and hold for a week or more? or will you be a short term or long term trend follower?
8. Back Testing. You need back testing either with a computer, by reviewing charts, or others research to show that your system is a winner.
9. Performance Review. You must keep a detailed log of your trades and watch your performance to understand the wins and losses and their causes.
10. Risk vs. Reward. Each trade must begin with the potential of winning more money than you are risking.
This is a very basic outline, I suggest expanding this to include 30 rules minimum; 10 each covering the areas of risk management, psychology, and method. If you can write this, believe it, and follow it, you will win in trading the only question that remains is when?
Markets Traders Have a Wild Imagination
Traders lose because of their imagination and hope that it is disguised in the form of hope. Non-experienced traders can make very good guesses on directions at times, however they just choose not to place specific trading targets for their trading. If they do, they also remove them because of rapid moves in their favor. Now the interesting part starts: they start to imagine levels that they would like the market to move towards. That never happens unless the market is in a strong trending move.
Why does this process occur?
Simple: traders hope to gain as much as they possibly can. Therefore, they get the “if” scenario wandering off with their thoughts. They want to max out on a move almost wishing to take the max point.
The thought that one trade could cover the losses of another trade is also preventing traders from setting realistic goals for price targets.
Cut your losses short, no questions asked
The majority of unskilled investors stubbornly hold onto their losses when the losses are small and reasonable. They could get out cheaply, but being emotionally involved and human, they keep waiting and hoping until their loss gets much bigger and costs them dearly.”
William O’Neil
The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.”
Victor Sperandeo
Some people say, “I can’t sell that stock because I’d be taking a loss.” If the stock is below the price you paid for it, selling doesn’t give you a loss; you already have it.
William O’Neil
When I became a winner I went from ‘I figured it out, therefore it can’t be wrong’ to ‘I figured it out, but if I’m wrong, I’m getting the hell out, because I want to save my money and go on to the next trade.’”
Marty Schwartz
Its NOT a loss until you sell
Ed Easterling’s 12 Rules of Market Cycles
Here are Ed Easterling’s 12 Rules of Market Cycles:
1. Secular cycles are driven by the inflation rate (deflation, price stability, and higher inflation)
2. Secular bulls occur when P/E starts low and ends high over an extended period
3. Secular bears occur when P/E starts high and ends low over an extended period
4. Cyclical bulls and bears are interim periods of directional swings within secular periods
5. Cyclical cycles are driven by market psychology, illiquidity, or other generally temporary condition(s)
6. Time is irrelevant to the length of secular stock market cycles
7. Secular bulls require a doubling or tripling of P/E
8. Secular bears occur as P/E stalls and falls by one-third to two-thirds or more
9. When real economic growth is near 3%, there is a natural floor for P/E between 5 and 10, a natural ceiling around the mid-20s, and a typical average in the mid-teens
10. If economic growth shifts upward or downward for the foreseeable future, the natural range moves upward or downward, respectively
11. Inflation drives P/Es location within the range; economic growth drives the level of the range
12. The stock market is not consistently predictable over months, quarters, or periods of a few years; the stock market is, however, quite predictable over periods approaching a decade or longer based upon starting P/E
25 Trading Lessons From Jesse Livermore
1. Watch the market leaders, the stocks that have led the charge upward in a bull market. That is where the action is and where the money is to be made. As the leaders go, so goes the entire market.
If you cannot make money in the leaders, you are not going to make money in the stock market. Watching the leaders keeps your universe of stocks limited, focused, and more easily controlled.
2. There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly build into human nature, that always gets in the way of human intelligence. Of this I am sure.
All through time, people have basically acted the same way in the market as a result of greed, fear, ignorance, and hope. This is why the numerical formations and patterns recur on a constant basis.
I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humans — and human nature never changes.
3. The market will often go contrary to what speculators have predicted. At these times, successful speculators must abandon their predictions and follow the action of the market. Prudent speculators never argue with the tape. (more…)