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Archives of “better chance” tag
rssWhat Kind of Person is Best Suited to Trading?
Great traders have a few personality traits that do give them a natural advantage. That’s not to say you can’t succeed without them, just that it’ll be an uphill battle and a greater degree of reflection and self-correction will be required. The trader with the best chance of success will be –
Independent. Being happy with a good deal of autonomy will allow you to confidently execute your plan without needing 25 people to concur with your analysis. Trading is a solitary game, and you need to be able to thrive on your own, to a large extent. Support is great but when it comes down to it, it’s all up to you.
Decisive. If you take hours to do something simple like choose a burger off a menu, the odds of you being able to see a trade set-up and coolly pull the trigger are greatly diminished. Especially if you trade short time-frames that can be the difference between success and failure.
Insightful. If a trader can honestly look at their skills, motivations and short-comings and actively work to rectify them, they have the tools to over-come nearly anything the market throws their way. (more…)
Plan the Trade, Trade the Plan
This is where all the thinking in trading comes into play, while writing your trading plan. Once you have created your rules to trade by, you become more systematic and logical in your thought process for executing successful trades. Your personal trading plan will include every step of the trade from identifying to exiting your trade. By having your setup written down in your plan, you will have a better chance of using patience and discipline to wait for your entry. Otherwise, you will use emotions to enter trades and we all know where that will get you. After entering your trade, you will have more confidence because you have back-tested your strategy and know that it has a successful track record and will give you that extra edge over your competition. Identifying your entry strategy will help you execute your strategy in an efficient manner with no hesitation. There will be no guessing or wondering what to do once your setup is identified, you just click and go. Your risk management is also pre-defined so your initial protective stop is set on entry and you know when you will be moving your protective stop to breakeven after the market moves in your direction by a certain amount. Of course, our price target is also known in advance and how we will exit the market at this target. Will we have a set price target, a trailing stop, a time stop, etc.?
Amos Hostetter :Invaluable Trading Principles
Try to find a long term trend and ride it up. Stay with the trend and don’t be tempted to grab a quick profit. Patience is one of the most important traits of a trend follower.- Be careful not to be shaken out by market fluctuations. Instead try to sit tight as long as there are no warnings showing up. Prices that come back so that your initial gain halves are not necessarily a reason to sell.
- Big wins can only be achieved with major trends. Find them and don’t hesitate to buy at high prices when you may think it is too late. A market is never too high to buy or too low to sell.
- Necessary is of course a stop loss near the entry point. A stop is the easiest way to put your capital at work on a trend, because otherwise you are too often and too long stuck in a trading market which goes nowhere or worse in a falling market.
- Absolutely forbidden is averaging down or fighting the market trend.
- To think that a market is cheaper now after prices came down and therefore must offer a better chance than it did when prices were higher, will put you in the wrong stocks at the wrong times.
- Never try to sell at the top. The trend may continue. Sell after a reaction if there is no rally.
- On the other hand don’t expect the market to end in a blaze of glory. Look out for warnings.
- Tape reading can tell you only that something is wrong. Don’t try to analyze the flow of transactions as the tape shows them in too much detail.
- Don’t look for breaks. Look out for warnings.
- Pyramid stocks only if the initial investment shows a gain.
- Look out for normal market behavior. If a market doesn’t act right, don’t touch it.
- If in a bear market a complete demoralization develops suddenly it may be a sign for a starting bull market.
- Observation of the market gives the best tips of all. Follow your experience to exploit them, while sticking to facts only.
Try to find a long term trend and ride it up. Stay with the trend and don’t be tempted to grab a quick profit. Patience is one of the most important traits of a trend follower.Aim Small, Miss Small
As many of you already know, one of the biggest factors in successful trading is how well you manage the trade – that is the stop-losses you place, the amount of capital that you put to work, where you take profits, and how you protect the profits that you already have. You could, no doubt, write many books on each of these subjects, but for now, I’m going to focus on a small, but critical aspect of risk-management and my inspiration comes from the movie “The Patriot”, which happens to be one of my favorite movies of all time.
In the clip below, Benjamin Martin (the father) asks his two young boys, “What Did I tell ya ‘fellas about shooting?” and they replied, “Aim Small, Miss Small”. Every time I hear those words I tell myself how true they ring across so many spectrums of life. As an avid hunter, if you just aim the gun at the direction of the game you are targeting, you are bound to miss. However, if you pick out a tiny, specific area of the animal, whether its the upper-right side of the chest, or some other smaller area, you have a much better chance of hitting your target. In fact, the smaller the target area, the lesser amount of margin for error you have in missing.
So how does this apply to trading, you must be asking? The stop-loss that we set in relation to our entry price is a reflection of our “Trading-Aim”
When I trade, I look for setups that are as close as possible to a desirable stop-loss. By desirable, that means I’m not just picking a spot that is 1 or 2% from my entry price for the sake of it being so, instead, if I am long, I am going to look to place a stop-loss somewhere underneath a critical support level, and if I am short, then I am going to place a stop just above an area of resistance. So the place that I choose for my stop-loss is that of a strategic area and a point to where I know, that if it hits the stop, I know that my thesis is no longer valid and therefore, I must exit the trade. (more…)
12 Market Wisdoms from Gerald Loeb
1. The most important single factor in shaping security markets is public psychology.
2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.
3. Accepting losses is the most important single investment device to insure safety of capital.
4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.
5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.
6. There is a saying, “A picture is worth a thousand words.” One might paraphrase this by saying a profit is worth more than endless alibis or explanations. . . prices and trends are really the best and simplest “indicators” you can find. (more…)
Gerald Loeb’s Market Wisdom
1. The most important single factor in shaping security markets is public psychology.
2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.
3. Accepting losses is the most important single investment device to insure safety of capital.
4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.
5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages. (more…)
Five key for profitable trading
There are five key things that make all the difference in profitable trading:
Focus on a system with bigger wins than losses, big wins makes robustness a much easier thing to find. A 1:3 risk/return ratio makes it much easier to be profitable even with more losses than wins.
Trade in the direction of the trend, in my experience buying dips in a bull market and selling into strength in a bear market is a much easier process than calling tops and catching falling knives.
Trade small versus your buying power, most systems fail because traders simple trade too big causing losses and being wrong to set them back far too much. Small losses are easy to come back from a string of big losses is fatal.
Trade price action not opinions. Be quick to cut losses and patient to ride winners. Getting stuck on what you think should happen could be fatal when the market disagrees with you.
Your goal as a trader is to find an edge over the 90% of traders that lose money, once you have that edge the more you trade the right signals the better chance you have of being profitable. Before you have an edge the volume of trades work against you as your luck runs out.