One found this Ted Talk on the Constructal Principalthe most stimulating video about markets I’ve seen in the last years.
Humans and animals instinctively nest before giving birth while price intuitively reverts to the mean or fair value time regulates gestation before each moves away– driven and sustained by an evolving flow structure that moves price and people more effectively and is fueled by monetary and human stimulus.
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.
Money solves all of your problems, till it doesn’t. The difficult part about trading is the problems start and the money (win or loss) CAN come at different times. Think about this concept another way, a headline comes out and the market reacts to it (or it is reasonable to think it is a catalyst). Well it turns out the headline is old and everyone already knew about it. The story/money and what it bears can often come at the “wrong” or different times. You are rewarded or punished just not always easy to connect the actions in real time.
Money does not necessarily mean your actions are correct. Yes over time it evens out but some run out of money, patience, emotional currency before it corrects. They weren’t honest about who they were that day. It is prudent to always look a gift horse in the mouth.
Many new traders deceive themselves. They celebrate small wins. They look for the magic solution to making money through a fail safe system. They believe a seminar or newsletter will change their life completely. The mistake trading for easy money and coaches and gurus for having that secret recipe for success. Well, there is none, there is simply trading robust methodologies that have an edge, while managing risk, and keeping the right mindset. Trading can be a very fruitful endeavor, but new traders need to quit looking to be given fish and learn to fish for their self. Don’t confuse these 10 things with trading success. New traders need to understand the difference between having a tug on their fishing line and having a boat full of fish.
in trading activity alone does not make money, the right activity at the right time is what makes money. Many times the right thing, is to do nothing.
In your actual trading you have to do four things very well to make money.
You have to know when to get in.
Only enter trades that have the highest probability of success and the best risk/reward ratio. Buy the best monster stocks during up trends. Short the fallen leaders when the game changes and they are under the 50 day. Buy the monster stocks at the gift of the 200 day moving average. Short down trending junk stocks. Go where the trends are.
You have to know when to get out.
When your trade reverses through a key support get out. When the market trend changes get out of your long positions. When your stop loss is hit, get out. When the stock reverses and hits your trailing stop, get out.
You have to know when to stay in. (more…)
That’s another way poker might be like trading: It’s easy to participate, difficult to sustain success. Many just play for the thrills of winning and losing; relatively few systematically learn from experience and build skills over time.
Have you ever heard of the legendary Turtle traders? Millionaire trader Richard Dennis set off to find out if traders were just born to trade, or if they could be trained to be successful in the markets from scratch. The answer? If they could follow rules they could be successful.
“I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.” –Richard Dennis: Founder of the ‘Turtle Traders’ quoted from the book Market Wizards:
The Turtle system proved that the traders that followed the rules went on to be millionaires and to manage money professionally.
Markets – What to buy or sell
Position Sizing – How much to buy or sell
Entries – When to buy or sell (more…)
