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49 Trading Rules for Traders

  
  Education
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  1. Usually they liquidate the good trades and keep the bad ones. Many traders don’t realize the news they hear and read has, in many cases, already been discounted by the market.
  2. After several profitable trades, many speculators become wild and unconservative. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that “can’t fail.”
  3. Traders often try to carry too big a position with too little capital, and trade too frequently for the size of the account.
  4. Some traders try to “beat the market” by day-trading, nervous scalping, and getting greedy.
  5. They fail to pre-define risk, add to a losing position, and fail to use stops.
  6. They frequently have a directional bias; for example, always wanting to be long.
  7. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake, or they look at the market in too short a timeframe.
  8. They overtrade.
  9. Many traders can’t (or don’t) take the small losses. They often stick with a loser until it really hurts, then take the loss. This is an undisciplined approach…a trader needs to develop and stick with a system.
  10. Many traders get a fundamental case and hang onto it, even after the market technically turns. Only believe fundamentals as long as the technical signals follow. Both must agree.
  11. Many traders break a cardinal rule: “Cut losses short. Let profits run.”
  12. Many people trade with their hearts instead of their heads. For some traders, adversity (or success) distorts judgment. That’s why they should have a plan first, and stick to it.
  13. Often traders have bad timing, and not enough capital to survive the shake out.
  14. Too many traders perceive futures markets as an intuitive arena. The inability to distinguish between price fluctuations which reflect a fundamental change and those which represent an interim change often causes losses.
  15. Not following a disciplined trading program leads to accepting large losses and small profits. Many traders do not define offensive and defensive plans when an initial position is taken.
  16. Emotion makes many traders hold a loser too long. Many traders don’t discipline themselves to take small losses and big gains.
  17. Too many traders are underfinanced, and get washed out at the extremes.
  18. Greed causes some traders to allow profits to dwindle into losses while hoping for larger profits. This is really lack of discipline. Also, having too many trades on at one time and overtrading for the amount of capital involved can stem from greed.
  19. Trying to trade inactive markets is dangerous.
  20. Taking too big a risk with too little profit potential is a sure way to losses. (more…)

5 Quotes From Market Wizard Steve Clark

  
  Education
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I was so inexperienced that I didn’t have the fear – the fear that cripples people who have been in the business too long. I have seen that so many times. Very few people maintain their ability to take risk throughout their career. Most don’t Most can’t. They have had too many bad things happen to them, too many fat tails, and it damages people – Steve Clark

What Clark is talking about here sounds like the opposite of beginner’s luck. I have seen a number of examples of this in the business world. People who work their whole lives to build something by taking risks suddenly don’t want to take risks anymore. They realize at some point that they now have things that they are no longer willing to lose. They have too much experience watching others fail.

It was a terrible shock to me ego. I began to doubt my ability. It was a very depressing time. It lasted for several months. I’ve seen this happen to many traders, and I have gone through it sever times myself. When you find that you can’t make any money, smaller and smaller losses take on greater and greater emotional significance, and you lose all perspective. – Steve Clark

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Day Trading – Trade Reluctance

  
  Education
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ReluctanceA problem that plagues all traders from time-to-time, trade reluctance, or the inability to pull the trigger has many causes. Recognizing yourself among the following Trade Reluctance Types can go a long way toward eliminating the problem. 

ALARMIST: Characterized by energy being diverted away from placing trades into over-vigilant preparation for low probability catastrophes. Habitual worrying about the worst case scenario. 

ANALYSIS PARALYSIS: Characterized by energy being over-invested in analyzing at the expense of executing trades. Preparation for making trades is out of control. Trader is a walking encyclopedia of technical information with little or no profits to show for it. 

HYPER-PRO: Characterized by energy being lost due to over-investment in the mannerisms and appearances of success. Energy is expended at the expense of goal-supporting behaviors such as analyzing trade performance or analysis for the next trading session, which is viewed as “demeaning” and “unprofessional,” and/or “shouldn’t be necessary.” Often accompanied by over-stylized use of professional jargon, name-dropping, and a reflexive need to appear better informed and more sophisticated than the “average” trader.  (more…)

Simple Things For Creating A Great Trade

  
  Education
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Research is showing how powerful our mental context is in making risk decisions. But the thing is, most traders think mental context is about what they know – their insights, their indicators and their experience. In reality, it goes much further and deeper than that.

Recent experience that seems totally unrelated to trading counts. For example, if you work on a desk, then the adminis-trivia and in particular, its effect on your attitude will influence your trading. If your boss or colleague seemed to criticize – or compliment – you, it will influence your trading.

College students have been shown to walk slower after hearing the words gray hair, glasses, knee replacement. Interviewers have shown they can feel differently about a candidate depending on the temperature of the coffee cup they just held. Our unconscious sensory and information machine is working all of the time. It pays to make it an asset and not a liability. (more…)

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