1) Fresh Ideas – I’ve yet to see a very successful trader utilize the common chart patterns and indicator functions on software (oscillators, trendline tools, etc.) as primary sources for trade ideas. Rather, they look at markets in fresh ways, interpreting shifts in supply and demand from the order book or from transacted volume; finding unique relationships among sectors and markets; uncovering historical trading patterns; etc. Looking at markets in creative ways helps provide them with a competitive edge.
2) Solid Execution – If they’re buying, they’re generally waiting for a pullback and taking advantage of weakness; if they’re selling, they patiently wait for a bounce to get a good price. On average, they don’t chase markets up or down, and they pick their price levels for entries and exits. They won’t lift a market offer if they feel there’s a reasonable opportunity to get filled on a bid.
3) Thoughtful Position Sizing – The successful traders aren’t trying to hit home runs, and they don’t double up after a losing period to try to make their money back. They trade smaller when they’re not seeing things well, and they become more aggressive when they see odds in their favor. They take reasonable levels of risk in each position to guard against scenarios in which one large loss can wipe out days worth of profits.
4) Maximizing Profits – The good traders don’t just come up with promising trade ideas; they have the conviction and fortitude to stick with those ideas. Many times, it’s leaving good trades early–not accumulating bad trades–that leads to mediocre trading results. Because successful traders understand their market edge and have demonstrated it through real trading, they have the confidence to let trades ride to their objectives.
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Archives of “business” tag
rssAll Type of Traders Are Trying To Catch Trend Only
Long term trend followers are trying to be right about the long term trends in the markets they trade using mechanical systems.
Buy and hold investors are trying to be right about the stock market indexes and mutual funds being in a long term trend over their lifetime.
Value investors believe that under priced stocks will reverse and trend higher over the long term based on the cheap price they are getting based on a companies fundamentals.
Day traders are trying to capture the trend that happens in one day’s time frame.
Swing traders bet that the trend reverses off support or resistance levels and give them a profit.
Can Slim traders are trading the trend of a hot growth stock out of a base price range or cup with handle pattern
Bear are betting that the trend reverses and something goes down in value and they make money.
Call buyers are trying to capture an up trend, call sellers want to profit from a down trend.
Put buyers are trying to capture a down trend, put buyers want to profit from an up trend.
Traders buying long option strangles are betting on a trend either way bigger than what is priced in, Strangle sellers are betting the trend will be less than what is priced in.
All trading methods are simply an effort at trend identification and capturing profits by entering at a high probability moment and exiting with profits in place.Being on the right side of the trend in your time frame is what a successful trading method is all about.
10 Reasons Trading is So Difficult ,Why Only 5% Traders Across Globe Mint Money
- You can back test a system as much as you want but when you start trading it the profitability will be determined by the market conditions not past price history. What looks great on paper can lose on a lot of consecutive trades right at the start.
- Your stop can be hit and then the market go in the direction you were positioned for.
- Sometimes that pullback that you are waiting for to buy never comes until the trend is over.
- Sometimes every momentum signal you buy will be a loser for a long time.
- Many times the market whipsaws you in a position for absolutely no reason you can understand.
- Sometimes your biggest position sizes are losing trades and your smallest position sizes are the winners.
- There is no ‘market’ you are trading against a herd of people all making decisions for many different reasons, and they are not predictable.
- You can feel foolish under performing buy and holders during straight up bull markets when you’re trading in and out.
- Some trading lessons can’t be learned they have to be experienced with real money.
- Money is made and kept based on the math of probabilities, risk, and reward not because a trader is the smartest but because they are the most flexible and adaptable.
Trading Wisdom by – Jon Tait
One of the most puzzling paradoxes of trading is that you have to show up every day, but most days your best move is to do nothing.
I don’t day trade, but I do look at a lot of time horizons, sometimes as short as 1 minute bars. But I’ve learned to focus my attention on shorter time horizons only when longer time horizons are at a critical juncture. My trading life became much simpler when just owning a stock was no longer a reason to look at a shorter time horizon than daily bars. I don’t even load up the quote streamer until I’ve made the decision to buy or sell a stock that day based on daily and weekly charts.
It can be more optimal to trade extremely short time horizons, but the benefits of trading very short term don’t scale linearly due to transaction costs becoming more difficult to beat.
For me, it is important to not have to grind for every dollar. I don’t want a full time job from the markets, but I do want to make high returns on my money, so I consistently reform my trading to be in line with these goals.
I start off every campaign in a stock very fickle, weak handed. As a position works for me and I pyramid into a larger position, I become a strong hand; I’m dug in.
Quotes on Manipulation
“Observation # 1: The greatest number of losing traders is found in the short-term and intraday ranks. This has less to do with the time frame and more to do with the fact that many of these traders lack proper preparation and a well thought-out game plan. By trading in the time frame most unforgiving of even minute error and most vulnerable to floor manipulation and general costs of trading, losses due to lack of knowledge and lack of preparedness are exponential. These traders are often undercapitalized as well. Winning traders often trade in mid-term to long-term time frames. Often they carry greater initial levels of equity as well.” Walter Downs
“The ability of banks to issue claims far in excess of their reserve position is essentially regulated counterfeiting when those claims have little or no chance of being satisfied, and it is an inherently cyclical and destabilizing process. The Fed, as US banks’ chief regulator, has not only condoned this imprudent, unsustainable (and Constitutionally-dubious) activity, it has encouraged and abetted it.” Paul Brodsky and Lee Quaintance
“He did not publish or spread any information that was false. Instead he praised the companies he had invested in to the skies, including the spreading of rumors. Does his action fall into information-based manipulation because of this? The answer is: partly. From the total gain of USD 800,000 he had to repay USD 285,000, so just over a third of the total gain.” Mark Schindler
“Runs occur when a group of traders create activity or rumors in order to drive the price of a security up.” Unknown (more…)
15 Ways to Manage Trader Stress
- Only risk 1% of total trading capital per trade with stop losses and proper position sizing. Proper positions sizing makes the emotional impact of any one trade only one of the next one hundred a totally different mental perspective than an all in/have to be right Hail Mary trade.
- Only trade a position size you are comfortable with.
- Trade a method or system you believe in based on back testing of a positive expectancy.
- Know where you will get out of a trade before you get in.
- Only trade with a detailed trading plan.
- Believe in your ability to follow your trading plan. YOu must have faith in yourself to lower your stress levels.
- Know yourself as a trader and only take your kind of trades. Take trades that will leave no regrets because they were good trades regardless of out comes.
- Do not listen to any unsolicited advice about the trade you are in, follow your own plan. Noise can really cause stress and mess up a trade, trade with emotional horse blinders on, keep out others voices and listen to your trading plan.
- Sit out markets that you are uncomfortable trading due to volatility or other looming risks. Know when it is time to trade and time to ‘go fishing’. This can save you a lot of emotional capital.
- Do your homework before you trade. Be confident in your trade until it hits your stop. Get out when your stop is hit, you already lost money don’t lose sleep as well.
- Keep your ego out of your trading, run it like a business.the P& L is your focus not your ego and not trying to prove anything to anyone else.
- Only trade when the odds are believed to be in your favor. It is much less stressful trading with the trend than against it.
- Do not blame yourself for losses if you followed all your rules. The market giveth and the market taketh away, just keep taking your entries and exits.
- If you do not know what to do, DO NOTHING.
To lower stress levels trade less and get away from watching every single price change. Day traders could trade only the open and closing hour, swing trader and trend traders could just take opening or closing signals. You could go from every tick to just checking in every hour or so if you have options or hard stops in. Most of the days trading is random noise, and randomness will stress you out focus on your time frame and only the quotes that really manner when they manner.
Buffett quote on EBITDA.-Really Great !
“We’ll (Berkshire Hathaway [BRK.A][BRK.B]) never buy a company when the managers talk about EBITDA. There are more frauds talking about EBITDA. That term has never appeared in the annual reports of companies like Walmart (WMT), General Electric (GE) or Microsoft(MSFT). The fraudsters are trying to con you or they’re trying to con themselves. Interest and taxes are real expenses. Depreciation is the worst kind of expense: You buy an asset first and then pay a deduction, and you don’t get the tax benefit until you start making money. We have found that many of the crooks look like crooks. They are usually people that tell you things that are too good to be true. They have a smell about them.”
Ten questions to ask yourself before every trade
Does this trade fit my chosen trading style? Whether it is: swing trading, momentum, break out, trend following, reversion to the mean, or day trading?
- How big of a position do I want to trade? How much capital am I going to risk? Am I limiting my risk to 1% or 2% of my trading capital?
- What is my risk of ruin based on my capital at risk?
- Why am I entering the trade here? What is the trigger to trade?
- How will I exit with a profit? A price target or trailing stop?
- At what price will I know that I was wrong? Where is my stop loss based on the position size?
- Will I be able to admit I was wrong and exit the trade if my stop is hit, or will my ego make me hold and hope?
- Is the risk small enough that I can emotionally handle the loss without blaming the market?
- Can I really risk this money or do I need it for upcoming bills? Trade with risk capital not living expenses.
- Am I committed to staying disciplined and following my trading plan on the trade?
I believe the answers to these questions will determine your success in any trade more than anything else.
Trading as a Business- Dick Diamond :Book Review
Dick Diamond has been trading fulltime since 1965. By my calculation that’s fifty years, although the subtitle of Trading as a Business(Wiley, 2015) is The Methods and Rules I’ve Used to Beat the Markets for 40 Years. Ah yes, at the beginning of his trading career Diamond didn’t beat the market. In fact, in late 1968, when he had positions in fifteen low-priced, go-go AMEX stocks, he went on a vacation and let the positions ride. Two weeks later he had lost 70% of his trading capital. It was a pivotal moment: either throw in the towel or change course.
Diamond slowly morphed into a short-term technical trader, comfortable with both long and short trades. He incorporated options into his trading arsenal. After the CME introduced E-mini futures in 1997, they became his preferred day-trading vehicle.
In this book Diamond shares the MetaStock templates he uses to make his trades. Traders who don’t have the MetaStock platform can most likely replicate three of his four templates—the moving average template, the moving ribbons template, and the RMO template. But they won’t have access to the Bressert indicator, which is based on cycle analysis and shows trend direction.
Diamond is always on the lookout for the 80/20 trade, the high-probability setup. Throughout the trading day he reads the market with his indicators, asking (1) whether the indicators are flat, trending, or somewhere in between, (2) whether the moving averages are separating or converging, (3) whether any divergences between price and momentum are developing, (4) whether the indicators are confirming each other or are in conflict, and (5) what the next most likely 80/20 trading opportunity is. (p. 118)
Trading as a Business is a thin book, devoted primarily to describing and illustrating the four templates. But it’s a decent starting place for the would-be technical trader.
Unavoidable Disappointment
If you’re trading for emotional satisfaction, you’re bound to have lots of problems and continue to struggle, for two reasons. First, often that what feels good is often the wrong thing to do. Second, the game of trading, and it is a game in many respects, involves being disappointed fairly often.
Even for profitable traders a certain number of trades will lose money, and even the winners don’t always work perfectly or match your exact expectations.
As a trader, it’s impossible to avoid disappointment, not every trade is going to work. You get stopped out and then see the trade go on to work without you, or you hesitate and miss the move, or you exit early to book profits and watch the move continue without you. When you think about it, trading involves a lot of disappointment. I cannot think of any other job that involves disappointment on such a regular basis. Even the most successful traders experience this. No way to escape it.
When you experience a lot of disappointment you’re going to experience a high degree of stress. And when stress overwhelms you…and by the way, stress can masquerade as performance anxiety or pressure to succeed, the emotional part of your brain will run right over the logical analytical part of your brain. You’ll know when that happens because that’s when your rules go out the window or you veer from your plan and you take a revenge trade or an impulse trade or you freeze up and hesitate. (more…)