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TRADING DISCOMFORT

Causes of Trading Discomfort

Discomfort in trading usually comes in two forms and both have micro and macro causes.

Monetary Discomfort – Just like it sounds, this is where you are uncomfortable because you are losing money.

This can happen simply because you have a position with an open loss that is beyond your comfort level, or it can have more a more complex genesis.

Are you down big for the year in your trading account?  Are you in financial trouble in your regular life?  Is the mortgage payment coming due and your trading profits are the funds you have to use to pay it?

Control Discomfort – This where you feel discomfort not because of the monetary loss, but because the trade is “not doing what it is supposed to.”

This could be the result of a choppy day where every trade you attempt, no matter long or short, reverses against you.

Or once again it could be a related to larger issue.  Are you the type of person that always needs to be in control in your life?  Do you have an obsession with always being “right?”  Is the world a place that would  be better off if it listened to your opinions DAMMIT? (more…)

DISCIPLINE IN TRADING

Discipline: “Habit of Obedience”

 Have a trading plan or system is essential to the exercise of good discipline, as it normally imposes certain parameters and sets out certain criteria which dictate how trading decisions should me made and what needs to be done in certain situations. Habitually following your plan is what is meant by the exercise of good trading discipline, which, in turn, will help you realize the best expected results possible from your plan. If you find that your trading plan or system is not meeting your expectations, despite habitually following it for a reasonable period of time, good discipline requires that you be prepared to review it and make any adjustments or fine tuning necessary for future use.

 Lack of Discipline

Day traders who suffer from lack of discipline often allow their emotions to rule their trading decisions, which often leads to bad decisions and unacceptable trading losses. Never allow your emotions to rule your trading. In order to trade successfully, you must develop a trading plan. (more…)

New Glossary of Finance Terms

glossaryBonus:  A form of extortion whereby employees of a company extract either shareholder or taxpayer money for their own pleasure regardless of the success or failure of said company.

Derivatives:  Trading vehicles created by over-educated  finance professionals for whom speculating in stocks and bonds was not quite risky or volatile enough.

Bulge Bracket Firm:  A Wall Street investment bank that is literally “bulging” with off-balance sheet leverage and bloated pay packages for the architects of said leverage.  They used to be referred to as “Too Big to Fail”, circa 2007-2008; they are now extinct.

Credit Ratings:  These are fictitious opinions of health and financial strength that are sold to the highest bidder.  The business of assigning credit ratings to bonds is similar to the business of receiving payola at a radio station for playing a particular record more often than others.  

Department of the Treasury:  This is a government agency in charge of rescuing companies and executives who make bad decisions or investments.  Oh yeah, another minor function they serve is printing the nations currency.

Federal Reserve:  An institution that ensures the inflation and subsequent bursting of asset bubbles roughly every 7 years.

Hedge Fund:  A betting pool, similar to a group of employees or friends who all contribute their money to a pot and buy lottery tickets.  Only in this case, a few of the participants charge everyone else involved a fee for picking which lotto numbers they will play. (more…)

Know When to Trade (and When Not to Trade)

Successful traders know when to trade: they trade when their system tells them to. That might seem like an obvious point, but people too often forget it during the excitement of actually having money on the line.
A trader should be governed by his or her system, not by the circumstances of the moment, the market, or the outcome of a few trades. Keep a long-term perspective which focuses on developing a consistent, repeatable strategy. You won’t know what is successful or what fails if you constantly change your reasons for trading.
It is hardest to keep this kind of control when you’re experiencing losses. But this is also the most crucial time to be consistent. Otherwise, you won’t know how to avoid downturns in the future, or how to prevent them from becoming too damaging. (more…)