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11 One Liners for Traders

  
  Education
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  • Buy from the scared, sell to the greedy.
  • Buy their pain, not their gain.
  • Successful traders are quick to change their minds and have little pride of opinion.
  • I made my money because I always got out too soon. (Bernard Baruch)
  • Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars. (Bernard Baruch)
  • Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting. (Jesse Livermore)
  • The faster a stock has climbed, the quicker it will fall.
  • The more certain the crowd is, the surer it is to be wrong. (Menschel)
  • Bear markets begin in good times. Bull markets begin in bad times
  • Never confuse genius with a bull market.
  • Always sell what shows you a loss and keep what shows you a profit

19+1 Trading Rules For Traders

  
  Education
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1. Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.20-RULES

2. Buy the first pullback from a new high. Sell the first pullback from a new low. There’s always a crowd that missed the first boat.

3. Buy at support, sell at resistance. Everyone sees the same thing and they’re all just waiting to jump in the pool.

4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.

5. Don’t buy up into a major moving average or sell down into one. See #3.

6. Don’t chase momentum if you can’t find the exit. Assume the market will reverse the minute you get in. If it’s a long way to the door, you’re in big trouble.

7. Exhaustion gaps get filled. Breakaway and continuation gaps don’t. The old trader’s wisdom is a lie. Trade in the direction of gap support whenever you can. (more…)

3 Trading Mistakes

  
  Education
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mistake-1) Trading Without Context – Many traders will enter positions with little more than a chart-based “setup” or a hunch that the market is heading lower. They don’t locate where the market is trading with respect to its daily range and often can’t identify where the relevant ranges are located. Is the most recent market move gaining or losing volume/participation? Are most sectors participating in the move? Without context, traders trade reflexively, not proactively.
2) Trading Without Targets – Focused on entries, traders often don’t explicitly identify where they would harvest profits. They hold trades too long, exiting in a panic after reversals, or they take profits quickly, missing opportunity. They don’t factor current volatility into estimates of how far the market could move on their time frame, and they often don’t explicitly look for targets based upon prior moves and ranges.
3) Trading Without Reflecting – The slow times of day are excellent opportunities to review trading for the day, reformulate market views, correct mistakes, and set goals going forward. Many traders, however, never stop looking for the next trade, lured by the siren’s promise of breakout. Without the benefit of reflection, they compound errors, turning mistakes into blowups and blowups into slumps.

The Disciplined Trader: Developing Winning Attitudes by Mark Douglas

  
  Education
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Intro

  • Reaching the level of success they desire as traders will require them to make at least some, if not many, changes in the way they perceive market action.
  • The markets have absolutely no power or control over you, no expectation of your behavior, and no regard for your welfare.
  • There are only a few traders who have come to the realization that they alone are completely responsible for the outcome of their actions.  Even fewer are those who have accept the psychological implications of that realization and know what to do about it.
  • The nature of the markets made it easy no to have to confront anything that otherwise might be perceived as a problem because the next trade always had the possibility of making everything else in one’s life seem irrelevant.
  • I CREATED MY LOSSES INSTEAD OF AVOIDING THEM SIMPLY BECAUSE I WAS TRYING TO AVOID THEM.
  • Unsuccessful Trading Behaviors
    1. Refusing to define a loss.
    2. Not liquidating a losing trade, even after you have acknowledged the trade’s potential is greatly diminished.
    3. Getting locked into a specific opinion or belief about market direction.  I.E. “I’m right, the market is wrong.”
    4. Focusing on price and the money
    5. Revenge-trading to get back at the market from what it took from you.
    6. Not reversing your position even when you clearly sense a change in market direction
    7. Not following the rules of the trading system.
    8. Planning for a move or feeling one building, then not trading it.
    9. Not acting on your instincts or intuition
    10. Establishing a consistent patter of trading success over a period of time, and then giving your winning back to the market in one or two trades.

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Your Trading Method-10 Points

  
  Education
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 1.“Trade What’s Happening…Not What You Think Is Gonna Happen.” – Doug Gregory
2.    Go long strength; sell weakness short in your time frame.
3.    Find your edge over other traders.
4.    Your trading system must be built on quantifiable facts not opinions.
5.    Trade the chart not the news.
6.    A robust trading system must either be designed to have a large winning percentage of trades or big wins and small losses.
7.    Only take trades that have a skewed risk reward in your favor.
8.    The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?” – Richard Weissman. Trade primarily in the direction that a market is trending in on your time frame until the end when it bends.
9.    Only take real entries that have an edge, avoid being caught up in the meaningless noise.
10.    Place your stop losses outside the range of noise so you are only stopped out when you are likely wrong.

7 Basic Truths of Trading

  
  Education
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  1. Well-defined objectives. Are you trying to beat a certain return hurdle, like inflation or an index? Are you trying to generate 5% or 50% returns per year? You have to understand what you are trying to do and then bend your investment process around it. The other way around isn’t possible.
  2. An understanding of the markets that you will be operating in. Stick to what you know. Narrow your focus so as to make the most of your efforts. You need to know everything about the markets where you’re taking positions.
  3.  A clearly defined methodology for getting into and out of positions. This includes which indicators, news items, fundamental data points you look at and when you take action. This is your checklist—you should have it so well defined that you can be sure of the exact steps along the way. You need a game plan so that you stay consistent and disciplined and don’t get flustered under pressure. It should become automatic and engrained.
  4. This methodology must utilize your strengths and skills and suit your personality. A cerebral, research-driven economist should put that to work, instead of becoming a swing trader based on technical analysis. An adrenaline-fueled athlete should be an intraday trader, not be a long-term trend follower. Remember, every successful trader has a methodology of their own which plays to their strengths and their personality.
  5. This methodology has a positive statistical expectancy– the gains from winners more than outweigh the losses on losing trades. Use your own statistics and the Kelly Formula for a rough guide as to whether or not you have positive statistical expectancy.  On average you want to expect to win on an individual trade, meaning that your expected wins outweigh your prospective losses. That doesn’t guarantee that you will actually profit on each trade, it just means that over a sufficiently large quantity of trades, you will come out ahead.
  6. A well-stated risk management policy for when you get out of losing positions and how you manage risk overall. Cut losers. Let winners ride.  Many people have tried to overthink this rule and ended up losing as a result. Furthermore, you never want to put yourself in a position where you can blow up, so you need to be thinking how you can avoid taking excessive risk in the first place. Just remember Warren Buffett’s Two Rules:A framework for sizing positions. This is related to risk management— obviously, you don’t want to take a position that’s over a certain size, ever. But you may also want to size positions according to certain specific critieria, such as your conviction in the position or volatility in the market. Or they could all be the same size. Nonetheless, your methodology has to be able to address it and come up with a well-reasoned answer.
    1. Never Lose Money.
    2. Never Forget Rule #1.
    1. A framework for sizing positions. This is related to risk management— obviously, you don’t want to take a position that’s over a certain size, ever. But you may also want to size positions according to certain specific critieria, such as your conviction in the position or volatility in the market. Or they could all be the same size. Nonetheless, your methodology has to be able to address it and come up with a well-reasoned answer.

Admit when you're wrong… and profit

  
  Education
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In trading, it’s best to quickly admit when you’re wrong.  If you can keep your losses to a minimum, you will be able to preserve your trading capital (along with your mental capital) and improve your odds of profiting from future opportunities. As Jesse Livermore once said, “I have long since learned, as all should learn, not to make excuses when wrong. Just admit it and try to profit from it.” 
JL-QUOTE

16 Rules for Traders

  
  Education
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1. Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position… not ever, not never! Adding to losing positions is trading’s carcinogen; it is trading’s driving while intoxicated. It will lead to ruin. Count on it!

2. Trade Like a Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.

3. Mental Capital Trumps Real Capital: Capital comes in two types, mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.

4. This is Not a Business of Buying Low and Selling High: It is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.

5. In Bull Markets One Can Only Be Long or Neutral, and in bear markets, one can only be short or neutral. This may seem self-evident; few understand it, however, and fewer still embrace it. 

6. “Markets Can Remain lllogical Far Longer Than You or I Can Remain Solvent.” These are Keynes’ words, and illogic does often reign, despite what the academics would have us believe.

7. Buy Markets That Show the Greatest Strength; Sell Markets That Show the Greatest Weakness: Metaphorically, when bearish we need to throw rocks into the wettest paper sacks, for they break the most easily. When bullish we need to sail the strongest winds, for they carry the farthest.

8. Think Like a Fundamentalist; Trade Like a Simple Technician: The fundamentals may drive a market and we need to understand them, but if the chart is not bullish, why be bullish? Be bullish when the technicals and fundamentals, as you understand them, run in tandem.

9. Trading Runs in Cycles, Some Good, Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In “good times,” even errors turn to profits; in “bad times,” the most well-researched trade will go awry. This is the nature of trading; accept it and move on.

10. Keep Your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we’ve known have the simplest methods of trading. There is a correlation here! (more…)

5 Distinguishing Features of Great Traders

  
  Education
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* Everyone is wrong in the markets at times. The difference between the great traders and the unsuccessful ones is in how long they stay wrong.
* Addictive traders get high from action; great traders get high from mastering markets–and mastering themselves.
* Great traders do their best work when they are not trading; unsuccessful traders do not work when they are not trading.
* Every loss of discipline is a self-betrayal; great traders are true to themselves and stay disciplined as a result.
* Great traders focus on the two things they can always control: when they play and how much they bet. 
You will never achieve greatness by minimizing your weaknesses. At best that will bring you to average. The path to greatness lies inmaximizing strengths: becoming more of who you are when you are at your best. Here are five things I look for in successful new traders.

It’s never too late to innovate

  
  Education
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Buffett’s having fun with his new partnership-purchase of Heinz. The structure of the deal: Both Berkshire and a Brazilian private equity firm bought the company’s common stock, and then Berkshire, as the financing partner, bought a preferred stock paying 9% interest with the ability to exchange it for even more common shares later. Early results of the takeover have been encouraging and Buffett seems tickled by the creativity of the transaction. “With the Heinz purchase, moreover, we created a partnership template that may be used by Berkshire in future acquisitions of size.” Including Heinz, Berkshire now owns 8 1/2 companies that would be included in the Fortune 500 if they were standalone entities, we are told. One could envision Berkshire doing a Heinz-like transaction once a year!

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