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Strategies to prevent overtrading

  
  Education
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1. Before each trade, clear your mind.

As I was flipping through channels, I came upon an interview with a surfer. He was saying that he knew a big surf would come and he would go underwater. The interviewer asked, how does he handle it? He said, it is simple. If I panic, I only have 3-5 seconds of air to breathe. If I stay calm, I have 45-60 seconds of air.

What does surfing have to do with trading? Well, especially when the markets are choppy, if you overtrade, you could lose all of your capital. However, if you take a moment and think about your trades, you can have much better results.

2. Have a trading plan and stick to it.

Plans are roadmaps. You want to know where you are headed. Think about it. If you are having a surgery, you want your surgeon to know why he is performing the surgery, where he should start, and what is the expected outcome.

In order to stick to your plan, think about your plans/rules as giving your word. Usually, we associate giving our word as a contract and we do not break it with others.

However, this rule does not apply to ourselves. So treat yourself as well as you would treat your best friend, and keep your word to yourself.

3. Look at each trade as an individual transaction.

Ask yourself:

If this was the first trade of the day, would I get into it?

What would be the initial size of this trade?

Do not look at an individual trade to make up for all of your losses.

4. Create a routine that works for you.

We are creatures of habit. As Aristotle says, “We are what we repeatedly do. Therefore, excellence is not an act, but a habit.”

5. Come from abundance.

There are a lot more opportunities. You will get what you expect. You might have heard of the following:

Imagine going to the ocean and taking water from the ocean. You can use a thimble or you can use a huge tub. You can do it once or as often as you want. It does not matter to the ocean, it is up to you and what you think you deserve.

6. Be patient – look for the right opportunities.

As the saying goes, there is a lot of fish in the sea.

7. Keep a daily journal.

To start with, keep track of:

Where you got into the trade

Where you exited the trade

Why you got into the trade

Why you got out of the trade

After a while, you’ll notice your own patterns.

8. Remember, this is a process. It takes time and experience. Rome was not built in one day.

9. Reward yourself.

I know this might sound counterintuitive. A lot of us wait to celebrate and reward ourselves till we do things perfectly. We think that if we start celebrating the intermediate steps, we’ll become complacent.

The truth is, to create a new habit, we need encouragement. Imagine a baby who is just starting to walk. S/he takes his/hers first step and then falls down. What do parents do? Do they yell and punish the child, or do they encourage and celebrate his/her action? If you said the latter, you are right.

Usually, encouragement works much better than punishment. The idea of celebration is to encourage ourselves.

Trading is simple, but not easy. The greatest difficulty is to accept the simple rules and follow them with discipline.

To summarize, the 9 steps to prevent overtrading are: (more…)

5 Keys to Trading Fear

  
  Education
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1. Trade With a Clear Mind

Do not make emotional decisions. Realize that emotions are emotions. What differentiates the successful traders from others is how we recalibrate our reactions to our emotions.

I was watching an interview with a surfer. The interviewer asked him what he does when a big surf comes and he goes underwater. The surfer said it was simple. “If I panic, I only have 3-5 seconds of air to breathe. If I stay calm, I have 45-60 seconds of air.“

What does surfing have to do with trading? If you panic and operate from a place of fear, you could lose all of your capital. However, if you take a moment and think about your strategies, you can have much better results.

2. Look at Your Portfolio Objectively

Think about your portfolio as if you are looking at the portfolio of your best friend. How would you advise him/her? (more…)

"6 Skills For Traders"

  
  Education
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Whether it is day trading, scalping, or investing,there are fundamental skills that each trader should master. Skill-building activities will help you sharpen your ability to make money and cash in on critical market movements.
1. Don’t Be a Perfectionist
Consistent profits are achieved from winning more than you lose – not winning every single trade.There are plenty of professional traders who generate profits by winning just 10% of their trades by maximizing gains and minimizing their losses.
2. Stick to a Trading Plan
Developing a trading plan is extremely important.Day trading around your own set plan for each position will produce consistent profits. A trading plan planner should be your best friend when developing your own trading
style. The key is sticking to what you’ve written down on paper.
3. Know the Odds
You should know the payoff odds for each trade that you take.Scalping produces large gains from small movements with higher risk than swing trading. Your trading plan should include a way to regulate how much capital you’re willing to risk on each position – but you should never risk more than 2% of your total account value. (more…)

Keep a Cash Reserve & Be Patient

  
  Education
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There are times when playing the stock mar­ket that your money should be inactive – waiting on the sidelines in cash – waiting to come into play.

In the stockmarket – time is not money – time is time ­and money is money.
Often money that is just sitting can later be moved into the right situation at the right time and make a vast fortune – patience – patience.

Patience is the key to success not speed.
Time is a cunning speculator’s best friend if he uses it right.

Remember the clever speculator is always patient and has a reserve of cash.

Jesse Livermore

Risk, fear and worry

  
  Education
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They’re not the same.

Risk is all around us. When we encounter potential points of failure, we’re face to face with risk. And nothing courts risk more than art, the desire to do something for the first time–to make a difference.

Fear is a natural reaction to risk. While risk is real and external, fear exists only in our imagination. Fear is the workout we give ourselves imagining what will happen if things don’t work out.

And worry? Worry is the hard work of actively (and mentally) working against the fear. Worry is our effort to imagine every possible way to avoid the outcome that is causing us fear, and failing that, to survive the thing that we fear if it comes to fruition.

If you’ve persuaded yourself that risk is sufficient cause for fear, and that fear is sufficient cause for worry, you’re in for some long nights and soon you’ll abandon your art out of exhaustion. On the other hand, you can choose to see the three as completely separate phenomena, and realize that it’s possible to have risk (a good thing) without debilitating fear or its best friend, obsessive worry.

Separate first, eliminate false causation, then go ahead and do your best work.

5 Keys to Dealing with Trading Fear

  
  Education
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How comfortable are you dealing with uncertainty?

As volatility and uncertainty increases, so does fear. When our emotions run high, then our decision making process suffers.

It seems like the harder we try, the worse things get.

We start reacting to things instead of being proactive. Then we feel overwhelmed.

Does this sound familiar?

One of the hardest things to deal with is uncertainly.

We have strategies for managing our risk in most aspects of our trading. However, we seldom talk about or have strategies for the most crucial element, our Personal Risk.

 

Have you noticed the panic that is going on in the markets? Do you know people who have been a contributor to it? Do you know them intimately?

How do you manage your Personal Risk? 

1. Trade With a Clear Mind

Do not make emotional decisions. Realize that emotions are emotions. What differentiates the successful traders from others is how we recalibrate our reactions to our emotions.

 

I was watching an interview with a surfer. The interviewer asked him what he does when a big surf comes and he goes underwater. The surfer said it was simple. “If I panic, I only have 3-5 seconds of air to breathe. If I stay calm, I have 45-60 seconds of air.“

What does surfing have to do with trading? If you panic and operate from a place of fear, you could lose all of your capital. However, if you take a moment and think about your strategies, you can have much better results.

2. Look at Your Portfolio Objectively

Think about your portfolio as if you are looking at the portfolio of your best friend. How would you advise him/her?

3. Limit Your Input

There are a lot of conflicting points of view. If we want to listen to all of them, it becomes very confusing, and the confused mind does not make a decision.

Instead of listening to everybody, pick the top 3 people that you respect and listen to them. This way, you can remain focused and have much better trading results.

4. Be In Tune With the Markets

Trade the markets as they are and not as you want them to be.

If we are not in tune with the markets and don’t listen to them, we are going to be in a losing game.

After all, hope is a lousy hedge.

5. Be In a Supportive Environment

It is important to listen to the people that we respect and are successful.

 

There are traders whose spouse and/or friends have little or no risk tolerance. As a result, these traders allow the fear of their spouse and/or friends to become the boundaries of their success.

Who are you choosing to surround yourself with?

Remember, not the most talented or skilled person wins the game. The game is won by the ones who can manage their Personal Risk and have a Mental Edge.

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