Seven Sins of Trading

7numbers1. Trading an inappropriate position size.
Simply put…if you risk too much, you’ll lose too much. In my eyes, this is the single most important rule of trading. Risking only 1-2% of an acct value is crucial to staying in the game.

2. Not knowing when to take the loss.
If you cannot answer the questions “Where am I taking the loss,” and “Where is my profit target” then stay out of the market. If you leave these decisions for later, then you will make them emotionally, which will be the worst decisions a trader can make.
3. Trading on someone else’s research or recommendation.
We have all heard stock tips thrown our way. Sometimes we might even hear people throw out potential trades that they are watching and become tempted to jump in. Sometimes I throw out stocks that I am trading and I am watching. The problem is that you might not know what this person is watching for, what strategy this stock fits, or what types of efforts are thrown into their research. If you take these stocks into consideration, make sure they are trades you would have likely come across on your own by conducting your own research. (more…)

Undertrade, undertrade, undertrade – Bruce Kovner

The lesson here is straightforward. Trade less frequently and trade smaller than you think you should.

Of these two, trading smaller size is easier to grasp and much more intuitive. If you are risking less, then your P&L won’t swing as wildly, allowing you to stay more level-headed and to make better decisions without getting scared or euphoric. You also are unlikely to lose as much during a bad run, allowing you to sidestep potential catastrophic losses and to stay in the game, both financial and psychologically. Ultimately, it’s steep drawdowns that end careers. If you can avoid big declines In your equity and be in the right place psychologically to bounce back, then you will have a long and successful career.

But trading less frequently is equally important. By making it a priority to trade less frequently, you are making sure that you think harder and deliberate before entering and exiting a position. This allows you to focus on executing your methodology, rather just impulsively leaping into and out of positions. That should boost the quality of each trade and in turn, your overall success.

You are also making sure that you are picking your spots, thereby boosting the percentage of your trades that are winners. Even a small increase in your win rate, e.g. from 40% to 43%, would mean a measurable improvement in profitability. Having more winners, and having those extra winners generate bigger gains on average than the losers, can mean the difference between a so-so year and a great year.

My Trading Lessons for Traders

Read….When ever you are Free.

  • Prepare, be confident & be decisive

  • Follow my trading rules without exception

  • Plan every trade with profit exit, stop exit and risk/reward ranking

  • Trade only when you have time AND you have an edge

  • Formulate and write down a trading/investing plan

  • Exit a position at my stops and not “hope” it will recover tomorrow

  • Trade the market I actually see, not the one I think I will see

  • Focus more on what’s actually happening rather than what I wish would happen

  • Learn to prevent my skepticism and opinion over the economy from keeping me from making good trades

  • Have a plan every day to trade the market and to not let my opinions of the market interfere with my trading

  • Concentrate on rule based trade management and not the outcome of the specific trade

  • Follow price action as opposed to listening to the fundamental “experts”

  • Listen to the market signal rather than market noise

  • Don’t be afraid of making mistakes

  • To pay more attention to technical signals to determine purchase/sell points rather than emotion & personal reasoning

  • Have more confidence in my trade ideas and believe in myself more often

  • Do not have a bias but instead let the charts be the guide

  • Have the discipline and fortitude to stick to my trade plans

  • To improve my organization of stock lists and automation of stock alerts

  • Do not over-leverage

  • Select only the most favorable setups

  • Try not to over analyze every potential trade

  • Lose less when I am wrong

  • Spend less time reading words and more time reading charts

  • Stick with winners and sell the losers

  • Allocate 2-3 hours each day & 5 hours every weekend to finding attractive setups

  • Increase position size and be in the market more (more…)

  • Yes, We are Unique

    I remember the quote from Bernard Baruch :

    “It is much harder to sell stocks correctly than to buy them correctly.” Because of the emotional aspect of trading, if a “stock went up, the average investor would hold because he wants more gains – he’s exhibiting greed. If the stock declines, he also holds on and hopes the stock will come back so he can at least sell and break even – he’s hoping against hope.”

    Traders & Readers are sending us mail and writing that we are Born Bears.

    -101% its wrong thinking.We write/recommend and trade according to levels only.Not interested in Economy ,Inflation figure,Monsoon or Corporate Results and basically I dont trust any Corporate !!

    No Tantra ,No Mantra & No Yantra.

    No Astrology !!

    Just power of chart and our Vision.

    Today our market forecast has confirmed it, nth time.

    Refer to this exclusivity in our web-site.

    As per the forecast market was weak till 10-35, then recovered to +ve zone uptill 1-35 and as per the unique forecast, collapsed from 1-35 only to dwindle down heavily till end. 

    After 5185, our next Nf Hurdle was 5215, it went upto 5202.  On downside after it broke our 2nd support at 5146, we alerted all our Subscribers to Sell

     everything and Short market for a possible break 5114 where after it would be a bloodbath.  You all know NF collapsed to 5058, 150 points loss from the top.

    Weak Opening, V recovery from 10-35, and from 1-30 bear-attack… so don’t have any long position in market.

    Expected Bank NF will crash upto 9650.But it tumbled upto 9540 level….(Our Subscribers knows…..many more things )

    Now u all tell if anything else is left in this market. That’s why our recently concluded Subscription enrolment was such an astounding hit.

    All our subscribers / readers are busy in counting

    their earnings while all Bulls ,Blue Channel (Analysts ),Website Analysts are singing


    Technically Yours

    Anirudh Sethi/Baroda/India

    Beer ad has solution to pestering girlfriends

    This Andes beer spot, from Del Campo Nazca Saatchi & Saatchi in Argentina, shows guys at a bar using a high-tech contraption—a sound-proof “Teletransporter” with all manner of sound effects piped in—to convince their annoying girlfriends when they call that they’re not, in fact, at the bar. But it raises more questions than it answers. For starters, wouldn’t the girlfriends know about these machines already? Seems like something that would be all over the news! Also, what kind of person uses the hospital as an alibi for anything? That’s the easiest bluff in the world to call. And when she does call it, he’ll be in the hospital for sure. UPDATE: Here’s the Web site of the Teletransporter. And yes, the agency apparently installed these things around the city of Mendoza. Presumably the grainy footage of the guys is real footage, too.

    Traits of a Successful Trader

    We urge you to use this checklist for your own trading and investing preparation.  We truly feel that these traits are very important for you to understand.  These trader traits coupled with the proper psychology can make a huge positive difference in your overall trading performance.     

    •  The ability to act on your decisions.

    •  The ability to accept responsibility for your actions.

    •  You must have emotional detachment from the markets.

    •  The ability to accept risk and take losses (you’ll never be right 100% of the time). (more…)

    S&P 500 Up Every Trading Day in November So Far

    After struggling at the end of October, the S&P 500 has finished higher on every single trading day so far in November.  This marks the 16th 6-day winning streak for the S&P 500 over the last ten years.  As shown below, the last four 6-day winning streaks have been met with declines on day seven.

    Human Life Today Has Become So "LESS "

    Phone :Cordless

    Cooking :Fireless

    Food :Fatless

    Dress :Sleeveless

    Youth :Jobless

    Leaders :Shamless

    Govt :Hopeless

    Job :Thankless

    Police :Clueless

    Policies :Aimless

    Conduct :Worthless

    Relations :Meaningless

    Attitude :Careless

    Feelings :Heartless

    Education :Valueless

    Arguments :Baseless

    Days :Restless

    Nights :Sleepless

    Future :Directionless

    & Still the  expectations are ENDLESS !

    Links worth reading

  • The secrets of the Afghan war released (WSJ)
  • BP set to announce Hayward departure (FT)
  • Must read: The death of paper money (Telegraph)
  • European Banking’s Next Focus Is Funding (WSJ)
  • U.K. Growth Forecast Cut on Budget Curbs, Ernst & Young to Say (BusinessWeek)
  • Taleb: Government Deficits Could Be the Next ‘Black Swan’ (BusinessWeek)
  • Deficits Don’t Matter as Geithner Growth Gets Lowest Yield (Bloomberg)
  • When will the US go the way of Rome (RCM)
  • A Method to Measure Risk and Return

    Placing a trade with a predetermined stop-loss point can be compared to placing a bet: the more money risked, the larger the bet. Conservative betting produces conservative performance, while bold betting leads to spectacular ruin. A bold trader placing large bets feels pressure or heat from the volatility of the portfolio. A hot portfolio keeps more at risk than does a cold one. Portfolio heat seems to be associated with personality preference; bold traders prefer and are able to take more heat, while more conservative traders generally avoid the circumstances that give rise to heat. In portfolio management, we call the distributed bet size the heat of the portfolio. A diversified portfolio risking 2% on each of five instrument & has a total heat of 10%, as does a portfolio risking 5% on each of two instruments. Our studies of heat show several factors, which are: Trading systems have an inherent optimal heat. Setting the heat level is far and away more important than fiddling with trade timing parameters. Many traders are unaware of both these factors. COIN FLIPPING One way to understand portfolio heat is to imagine a series of coin flips. Heads, you win two; tails, you lose one is a fair model of good trading. The heat question is: what fixed fraction of your running total stake should you bet on a series of flips?

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