Your win rate expectancy sets the probability for your longest losing streak:
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rssWrite down your plan. You need to know exactly under what conditions you will enter / exit a trade.
Important Trading Lessons
These are some of those fundamental and undeniable truths, as I have come to understand them over the course of my trading career:
- Most of the time, markets are very close to efficient (in the academic sense of the word.) This means that most of the time, price movement is random and we have no reason, from a technical perspective, to be involved in those markets.
- There are, however, repeatable patterns in prices. This is the good news; it means we can make money using technical tools to trade.
- The biases and statistical edges provided by these patterns are very, very small. This is the bad news; it means that it is exceedingly difficult to make money trading. We must be able to identify those points where markets are something a little “less than random” and where there might be a statistical edge present, and then put on trades in very competitive markets.
- Technical trading is nothing more than a statistical game. The parallels to gambling and other games of chance are very, very close. A technical trader simply identifies the patterns where an edge might be present, takes the correct position at the correct time, and manages the risk in the trade. This is, of course, a very simplified summary of the trading process, but it is useful to see things from this perspective. This is the essence of trading: find the pattern, put on the trade, manage the risk, and take profits. (more…)
SYMPTOMS OF LACKOFFOCUSPHILITUS
Do you suffer from lackoffocusphilitus?
You know it is so easy to talk about a trader losing his or her focus and to discuss the importance of focus but what good does it do if the trader is not aware of her lack of focus? To lack focus is one thing but to not be aware of it is quite another. In creating proper self awareness it is important to recognize symptoms. Once the symptoms are determined then the cause can be discovered. Much like a physician who asks what is wrong, “what ails you” so he can then determine the disease and with it design a proper course of action. What follows are some of the symptoms of the lack of focus. If several of these are present then you are most likely suffering from lackoffocusphilitus.
1. Unusually high string of losses uncommon with your trading history and probability statistics.
2. Loss of interest in Market study.
3. Ignoring your open position account balance (otherwise known as denial).
4. Anticipating and looking forward to the Market close instead of the open.
5. Spending more time reading chat room comments than reading the charts.
6. General fatigue.
7. Tendency to beat yourself up with negative self talk.
8. Lack of confidence in entering your own high probability edge.
9. Not recognizing your edge when it is offered.
10. Blaming the Market for mistakes and losses.
11. Studying the charts and suggestions of others in place of, instead of in conjunction with, your own studies.
Andrew Carnegie's 10 points of personal power:
You mean my whole fallacy is wrong
1st PODCAST -On Trading Secret Formula's -Anirudh Sethi
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Great Expectations
The best things in life are unexpected – because there were no expectations – ELI KHAMAROV
Legendary trader Roy Longstreet was once asked by Intermarket Magazine, “Why have you succeeded in trading to such a degree and why do most traders fail?” Roy answered “Many major problems people have in trading are caused by their expectations – of where the market is headed, how much money will they make from this trade, etc. One thing I learned that has helped me: it is wrong for a person to enter any market with any preconceived expectations.”
He went on to say, “I know that there’s always the possibility that what I don’t want to happen, will happen. The market will not act in accord with my expectations. You have to ask yourself the question, how must you function to survive? The answer is to be able to accept a loss. Not having expectations makes it a little easier to accept a loss. You must realize that losing is part of soul growth, so to speak. It’s necessary. It’s hard to accept, but necessary.”
This problem of attaching ourselves to an outcome is not exclusive to trading, but is a problem in investing in general. Expectations of higher and higher returns have become commonplace in an environment of lower opportunity to do so. Few people consider the fact that when they invest today, the riskless marketplace pays close to zero. For example, the one month Treasury Bill pays $40 for a $100,000 investment, and inflation is running around -1.3%, based on the Consumer Price Index. (more…)
Don't Chase A Trade
Everyone knows that chasing price is usually not beneficial, we either end up catching the move too late, or we get poor trade location, which makes it more difficult to manage the trade.
However, there are other forms of chasing that are just as common, maybe more common, and just as counter-productive. As a trading psychologist I see these all the time.
Traders who are not profitable are often too quick to chase after new set-ups and indicators, or a different chat room, if that’s your thing. Obviously, we need to have a trading edge, whether it is from the statistical perspective of a positive expectancy, or simply the confidence in a particular discretionary strategy such as tape reading, following order flow, market profile, etc. (more…)
Trader Brain
