Human emotion is both the source of opportunity in trading and the greatest challenge. Trade with an edge, manage risk, be consistent, and keep it simple. Good trading is not about being right, it’s about trading right. Trading with an edge is what separates the professionals from amateurs. Edges are found in the places between the battleground between buyers and sellers. Mature understanding of and respect of risk is the hallmark of the best traders. Ruin is the risk you should be concerned with the most. Don’t spent all your time admiring the fancy tools in the magazine. Keep it simple. Simple time-tested methods that are well executed will beat fancy complicated method every time. Trading with poor methods is like learning to juggle while standing in a rowboat during the storm. Sure, it can be done, but it is much easier to juggle when one is standing on a solid ground. Trading is not a sprint; it is boxing. The market will beat you up, screw with your head, and do anything it can to defeat you. But when the bell sounds at the end of the twelfth round, you must be standing in the ring in order to win. The market does not care how you feel. It will not prop up your ego or console you when you are down. |
Archives of “amateurs” tag
rssMaster Talk Presents…William Eckhardt!
“One adage that is completely wrongheaded is that you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke taking large losses, professionals go broke by taking small profits. What feels good is often the wrong thing to do. Human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. Two of the cardinal sins of trading – giving losses too much rope and taking profits prematurely – are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance. Don’t think about what the market’s going to do; you have absolutely no control over that.
Think about what you’re going to do if it gets there. It is a common notion that after you have profits from your original equity, you can start taking even greater risks because now you are playing with “their money”. We are sure you have heard this.
Once you have profit, you’re playing with “their money”. It’s a comforting thought. It certainly can’t be as bad to lose “their money” as “yours”? Right? Wrong. Why should it matter whom the money used to belong to? What matters is who it belongs to now and what to do about it. And in this case it all belongs to you.”
Forecasting the Market
Amateurs attempt to make a forecast while professionals manage information to make decisions based on probabilities. Dr. Alexander Elder compares this to a Doctor that received a patient with a knife stabbed in his chest. The family will ask, “will he survive?” and “when can he go home?” But the Doctor is not forecasting, he must prevent the patient from dying, remove the knife, saturate the organs and carefully watch for an infection. He monitors the health trend of the patient and takes measures to prevent any complications. He is managing, not forecasting. To profit in trading you do not need to forecast the future, you need to derive from the market whether the bulls or bears are in control. You need to practice money management techniques for long term survival. You trade against the sharpest mind in the ocean-like markets. Mental discipline is an undivided part of trading. Please remember the following points: Understand you are in the market for the long term, that you want to be a trader in even 20 years from now Develop your trading strategy, either technical or fundamental analysis. If “x” happens then “y “is therefore likely to take place. You may need different tools for trading a bull or a bear market Develop a money management plan, with the first goal being long term survival. Secondary goal is steady money growth and third goal would be high profits. Successful traders do not concentrate on the profit itself but maintaining successful trades regardless of the earned amount. Winners feel, think and act different than losers. Look inside yourself, eliminate the illusions and change the way you have been thinking and acting. Changing is hard but could pave the way to becoming a successful trader. |
The Win/Loss Ratio
“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. … (more…)
Trading Wisdom
“The trend is your friend” – perhaps the best known trading adage of all time, it is meant to remind traders to always identify the prevailing trend, and never to trade against it, but rather wait for retracements and then enter trades in the direction of the trend.
“The market can stay irrational longer than you can stay solvent” – The way the market reacts to certain news or events may not seem rational at times, but there is no sense in trying to fight the market – it moves where it moves and does not care one bit about your opinion.
“A fool and his money are soon parted” – If you are not smart about where you put your money, you will most likely lose it.
“The trading rules I live by are: (a) Cut losses, (b) Ride Winners, (c) Keep bets small, (d) Follow the rules without question, and (e) Know when to break the rules.” – Rules are important, but following them blindly does not necessarily lead to success. Know which conditions produced those rules in the first place, so that when the conditions change, the rules can too.
“Amateurs Focus On Rewards. Professionals Focus on Risk.” – Experienced traders think first about how much they can lose on a trade, base their calculations on that, and then see if they are happy with the potential reward the trade offers. Novices usually do the opposite, blinded by the allure of quick riches.
Good Luck-Advice for Traders
Always seek out differing opinions and challenge your beliefs. Except when you know you’re right, then that other bullshit just becomes a distraction. Good luck with that.
It is very important to be flexible and open-minded. But invest with set rules and an iron discipline. Good luck with that.
Technical analysis and charts only tell you about what has already happened in the past. It’s much better to use the information from the future that we have when making decisions. Good luck with that.
Never run with the herd. It’s much better to be all alone on open ground, running in the wrong direction and wholly conspicuous to predators. Good luck with that. (more…)
51 Professional Trading Tips
1. Trading is simple, but it is not easy.
2. When you get into a trade watch for the signs that you might be wrong.
3. Trading should be boring.
4. Amateur traders turn into professional traders once they stop looking for the “next great indicator.”
5. You are trading other traders, not stocks or futures contracts.
6. Be very aware of your own emotions.
7. Watch yourself for too much excitement.
8. Don’t overtrade.
9. If you come into trading with the idea of making big money you are doomed.
10. Don’t focus on the money.
11. Do not impose your will on the market.
12. The best way to minimize risk is to not trade when it is not time to trade.
13. There is no need to trade five days a week.
14. Refuse to damage your capital.
15. Stay relaxed.
16. Never let a day trade turn into an overnight trade.
17. Keep winners as long as they are moving your way.
18. Don’t overweight your trades.
19. There is no logical reason to hesitate in taking a stop.
20. Professional traders take losses because they trust themselves to do what is right.
21. Once you take a loss, forget about it and move on.
22. Find out what loss parameters work best for your setup and adjust them accordingly.
23. Get a feel for market direction by “drilling down” (looking at multiple time frames).
24. Develop confidence by knowing and executing your trade setups the same way every time.
25. Don’t be ridiculous and stupid by adding to losers.
26. Try to enter a full size position right away.
27. Ring the register and scale out of your position.
28. Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment.
29. You want to own the stock before it breaks out and sell when amateurs are getting in after the move.
30. Embracing your opinion leads to financial ruin.
31. Discipline is not learned until you wipe out a trading account.
32. Siphon off your trading profits each month and stick them in a money market account.
33. Professional traders risk a small amount of money on their equity on one trade.
34. Professional traders focus on limiting risk and protecting capital.
35. In the financial markets heroes get crushed.
36. Stick to your trading rules and you will never blow up your trading account.
37. The market can reinforce bad habits.
38. Take personal responsibility for each trade.
39. Amateur traders think about how much money they can make on each trade. Professional traders think about how much money they can lose.
40. At some point all traders realize that no one can tell them exactly what is going to happen next in the market.
41.Losing trades don’t diminish you as a person. You’re also not your winning trades. They are just by-products of the business you’re in.
42.Act in your best interest – placing a trade because you’re afraid of missing out on a big move is NOT acting in your best interest.
43.Flawless execution comes from forming a habit. A habit is formed when it is repeated over and over again. Start practicing.
44.Don’t let personal/external factors affect the trading for thou judgment is clouded. Let the market show you what to do. Always.
45.Make sure your trading goals are 1) realistic, 2) attainable, 3) measurable. If they don’t meet these criteria, then the goal is nothing.
46.You want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point—which is typically where you will set your stop when you buy a breakout. (In case you ever wondered why you get stopped out on a lot of “failed” breakouts).
47.Amateur traders always think, “How much money can I make on this trade!” Professional traders always think, “How much money can I lose on this trade?” The trader who controls his or her risk takes money from the trader whose head is in the clouds.
48.. Siphoning out your trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business and not a place to seek thrills. If you want an adventure, go live in Minnesota for a winter. If you want excitement, deliberately forget your anniversary. Just don’t trade.Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.
49.
50.Averaging down on a position is like a sinking ship deliberately taking on more water.
51.You Need MONEY -MIND-METHOD & Target to get success in Trading.If u miss any one of them…its my challenge to anybody in World …U will never ever be succesful !!
Updated at 22:45/07th Sept/Baroda
40 Rules for Traders
| 1. Trading is simple, but it is not easy. 2. When you get into a trade watch for the signs that you might be wrong. 3. Trading should be boring. 4. Amateur traders turn into professional traders once they stop looking for the “next great indicator.” 5. You are trading other traders, not stocks or futures contracts. 6. Be very aware of your own emotions. 7. Watch yourself for too much excitement. 8. Don’t overtrade. 9. If you come into trading with the idea of making big money you are doomed. 10. Don’t focus on the money. 11. Do not impose your will on the market. 12. The best way to minimize risk is to not trade when it is not time to trade. 13. There is no need to trade five days a week. 14. Refuse to damage your capital. 15. Stay relaxed. 16. Never let a day trade turn into an overnight trade.17. Keep winners as long as they are moving your way. 18. Don’t overweight your trades. 19. There is no logical reason to hesitate in taking a stop. 20. Professional traders take losses because they trust themselves to do what is right. 21. Once you take a loss, forget about it and move on. 22. Find out what loss parameters work best for your setup and adjust them accordingly. 23. Get a feel for market direction by “drilling down” (looking at multiple time frames). 24. Develop confidence by knowing and executing your trade setups the same way every time. 25. Don’t be ridiculous and stupid by adding to losers. 26. Try to enter a full size position right away. 27. Ring the register and scale out of your position. 28. Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. 29. You want to own the stock before it breaks out and sell when amateurs are getting in after the move. 30. Embracing your opinion leads to financial ruin. 31. Discipline is not learned until you wipe out a trading account. 32. Siphon off your trading profits each month and stick them in a money market account. 33. Professional traders risk a small amount of money on their equity on one trade. 34. Professional traders focus on limiting risk and protecting capital. 35. In the financial markets heroes get crushed. 36. Stick to your trading rules and you will never blow up your trading account. 37. The market can reinforce bad habits. 38. Take personal responsibility for each trade. 39. Amateur traders think about how much money they can make on each trade. Professional traders think about how much money they can lose. 40. At some point all traders realize that no one can tell them exactly what is going to happen next in the market. |
Trading Wisdom
“The market can stay irrational longer than you can stay solvent” – The way the market reacts to certain news or events may not seem rational at times, but there is no sense in trying to fight the market – it moves where it moves and does not care one bit about your opinion.
“A fool and his money are soon parted” – If you are not smart about where you put your money, you will most likely lose it.
“The trading rules I live by are: (a) Cut losses, (b) Ride Winners, (c) Keep bets small, (d) Follow the rules without question, and (e) Know when to break the rules.” – Rules are important, but following them blindly does not necessarily lead to success. Know which conditions produced those rules in the first place, so that when the conditions change, the rules can too.
“Amateurs Focus On Rewards. Professionals Focus on Risk.” – Experienced traders think first about how much they can lose on a trade, base their calculations on that, and then see if they are happy with the potential reward the trade offers. Novices usually do the opposite, blinded by the allure of quick riches.
Traders Make Decisions based on Probabilities
Most traders take price swings personally. They feel very proud when they make money and love to talk about their profits. When a trade goes against them they feel like punished children and try to keep their losses secret. You can read traders’ emotions on their faces.
Many traders believe that the aim of a market analyst is to forecast future prices. The amateurs in most fields ask for forecasts, while professionals simply manage information and make decisions based on probabilities. Take medicine, for example. A patient is brought to an emergency room with a knife sticking out of his chest – and the anxious family members have only two questions: “Will he survive?” and “when can he go home?” They ask the doctor for a forecast.
But the doctor is not forecasting – he is taking care of problems as they emerge. His first job is to prevent the patient from dying from shock, and so he gives him pain-killers and starts an intravenous drip to replace lost blood. Then he removes the knife and sutures damaged organs. After that, he has to watch against infection. He monitors the trend of a patient’s health and takes measures to prevent complications. He is managing – not forecasting. When a family begs for a forecast, he may give it to them, but its practical value is low. (more…)