Latest Posts

rss

Maintain a healthy balance between risk and reward

  
  Education
#  #  #  #  #

Let me give you an example: If you go to a casino and bet everything you have on “red”, then you have a 49% chance of doubling your money and a 51% chance of losing everything. The same applies to trading: You can make a lot of money if you are risking a lot, but then risk of ruin is very high. You need to find a healthy balance between risk and reward.

Let’s say you define “ruin” as losing 20% of your account, and you define “success” as making 20% profits. Having a trading system with past performance results let you calculate the “risk of ruin” and “chance of success”.

Your risk of ruin should be always less than 5%, and your chance of success should be 5-10 times higher, e.g. if your risk of ruin is 4%, then your chance of success should be 40% or higher.

6 Types of Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #
  • Pretrader. Everything is new at this stage, and everything is difficult. This is the point where the trader is learning the very basics of charting and of market structure and is also just starting to explore the marketplace.
  • Novice trader. At this stage, traders are not trading to make money; they are trading for experience and to begin to deal with the emotional challenges of trading. One of the main signs of progress in this stage is that the trader will start lose money more slowly than before—still losing, but losing less often and less consistently.
  • Early competent trader. The first step toward making money is to stop losing money. A trader whose wins and losses balance out (before commissions) has taken the first steps to competence. (At this stage, the trader is still losing money due to transaction costs and other fees.)
  • Competent trader. The first stage of real competence is achieved when the trader is able to cover transaction costs with trading profits. Reaching this stage may take a year and a half to two years, or more. Consider this carefully—two years into the journey a realistic expectation is to finally have accomplished the goal of being able to pay for your transaction costs. This may not seem like much, but very few individual traders ever survive to this stage.
  • Proficient trader. Here the trader starts making money. Errors and mistakes are far less frequent, but, when they do happen, they are corrected and reviewed, and the lessons are quickly assimilated. The trader has been exposed to the stressors of trading so many times that they have now lost most of their emotional charge and is able to approach the markets in an open, receptive state. As competence grows, the trader can look to manage more money; developing the skills of trading larger size and risk becomes a focus.
  • Experienced trader. It is difficult to imagine a trader becoming a true veteran without living through a complete bull/bear market cycle—about a decade in most cases. This trader has finally seen it all and has also become cognizant of the unknown and unknowable risks that accompany all market activity. It is possible for developing traders to gain much of this veteran trader’s knowledge through study at earlier stages of development, but there is no substitute for experience and seeing events unfold in the market in real time.

Discretionary & Systematic Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Discretionary Traders…

  • …trade information flow.
  • …are trying to anticipate what the market will do.
  • …are subjective; they read their own opinions and past experiences into the current market action.
  • …trade what they want and have rules to govern their trading.
  • …are usually very emotional in their trading and taking their losses personally because their opinion was wrong and their ego is hurt.
  • …use many different indicators to trade at different times. Sometimes it may be macro economic indicators, chart patterns, or even macroeconomic news. Many discretionary traders are trying to game what they believe the majority of other traders will be doing based on market psychology as if it is one big poker game.. They are trying to form an opinion on what the market will do.
  • … generally have a very small watch list of stocks and markets to trade based on their expertise of the markets they trade.

Systematic Traders…

  • …trade price flow.
  • …are participating in what the market is doing.
  • …are objective. They have no opinion about the market and are following what the market is actually doing, i.e. following that trend.
  • …have few but very strict and defined rules to govern their entries and exits, risk management, and position size.
  • …are unemotional because when they lose it is simply that the market was not conducive to their system. They know that they will win over the long term.
  • …always use the exact same technical indicators for their entries and exits. They never change them.
  • …trade many markets and are trading their technical system based on prices and trends so they do not need to be an expert on the fundamentals. (more…)

You Are Doing These 15 Things & You Are Losing Money In Market

  
  Education

  1. Egos.

  2. Emotions.

  3. Not respecting the mathematical risk of ruin.

  4. Gurus. (TV Analyst +Those Talking about Fundamentals )

  5. Television.(Avoid BLUE CHANNELS DURING TRADING HRS )

  6. Trading without a methodology.

  7. Trading with no trading plan.

  8. Stubbornness.

  9. Trading without a stop loss.

  10. Trend fighting in your time frame.

  11. Over trading.

  12. Taking bad entry set ups.

  13. Copying someones trades with no knowledge of their position sizing or time frame.

  14. Not knowing how to take profits in a winning trade while they are there.

  15. Not doing the proper homework before trading.( We Think to Trade for 5 hours Daily ,U need to sit 5 hrs after after mkt closes and to make Next Day Strategy )

Trading psychology

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

The market is always right–except at significant tops and significant bottoms.

Keep and open and flexible mind. When in doubt, get out.

If you must have a guru, take him or her with many grains of salt

Do not add to losing positions.

Try every day to make yourself stronger, better and more integrated as a person.

Stay true to yourself. Lying to yourself and others, and trading on hope and prayer do not work

Most importantly, accept and recognize that you are not perfect. You are human and are going to make mistakes. Trading is the only profession where losing is actually winning. BUT— unless you accept mistakes as mistakes and learn from them, you will not progress and be upside down. Unless you are able to get your trading brain out of the cave you will not accumulate regret. It is only through the true acceptance of a mistake as a mistake that we accumulate regret. This is how we learn and grow as traders and human beings.

Go to top