Archives of “Business_Finance” tag

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7 Things Each Trader Has To Accept

  
  Education
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If you truly are serious about being a trader then there are seven things that you will have to accept.

  1. You will have to accept that over the long term at best only 60% of your trades will be winners. It will be much less with some strategies.

  2. Accept that the key to being a successful trader is having big wins and small losses, not big bets paying off. Big bets can lead quickly to you being out of the game after a string of losses.

  3. Accept that the best traders are also the best risk managers, even the best traders do not have crystal balls so they ALWAYS manage their capital at risk on EVERY trade.

  4. If you want to be a better trader then you need to accept that trading smaller and risking less is a key to your success. Risking 1% to 2% of your capital on any single trade is the first step to winning at trading. Use stops and position sizing to limit your losses and get out when your losses grow to these levels.

  5. You must accept that you will have 10 trading losses in a row a few times each year. The question is what your account will look like when they happen.

  6. You have to accept that you will be wrong, a lot.  The sooner you accept you are wrong and change your mind the better off you will be.

  7. If you really want to be a trader then you are going to have to accept the fact that trading is not easy money. It is a profession like any other and requires much work and effort and even years to become proficient. Expect to work for free and pay tuition to the markets through losses until you learn to trade consistently and profitably.

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15 Points For Traders

  
  Education
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1. Don’t be a tradeaholic
Agreed
2. You trade to make money – not for fun, games, or to escape boredom
Definitely
3. Never add to a bad trade
If you have a specific strategy which includes adding to a trade which has gone against you, that’s one thing. Just “averaging down” is usually a bad play.
4. Once you have a profit on a trade, never let it turn into a loss
This can be a really good plan for psychology purposes, but it may or may not be appropriate for the type of strategy/system you employ.
5. No hoping, no wishing, no would’ve, no opinions, no should’ve
It’s hard not to second-guess, and reviewing thinking after the fact is part of the learning process, but never do it in trade.
6. Don’t be a one way trader – be flexible, opportunities on both sides
More opportunities doesn’t necessarily mean better trading. Some systems, markets, and/or traders are just better one-way only.
7. Know your risk on each trade. Trade with stops to limit losses
Definitely yes on the first part. The second part is up for debate in some ways.
8. Look for 3-1 profit objective trade
Totally disagree. This can’t be taken in isolation. You can have fantastic results with a smaller R/R ratio. It depends on your system’s or method’s win %.
9. When initiating a trade, always get your price (use a limit order)
Depends on your system. (more…)

10 Ways to Move From Peril to Profits

  
  Education
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  1. The first question to ask in any option trade is how much of my capital could I lose in the worst case scenario not how much can I make.
  2. Long options are tools that can be used to create asymmetric trades with a built in downside and unlimited upside.
  3. Short options should only be sold when the probabilities are deeply in your favor that they will expire worthless, also a small hedge can pay for itself in the long run.
  4. Understand that in long options you have to overcome the time priced into the premium to be profitable even if you are right on the direction of the move.
  5. Long  weekly deep-in-the-money options can be used like stock with much less out lay of capital.
  6. The reason that deeper in the money options have so little time and volatility priced in is becasue you are ensuring someones profits in that stock. That is where the risk is:intrinsic value, and that risk is on the buyer.
  7. When you buy out-of-the-money options understand that you must be right about direction, time period of move, and amount of move to make money. Also understand this is already priced in.
  8. When trading a high volatility event that price move will be priced into the option, after the event the option price will remove that volatility value and the option value will collapse. You can only make money through those events with options if the increase in intrinsic value increases enough to replace the vega value that comes out.
  9. Only trade in options with high volume so you do not lose a large amount of money on the bid/ask spread when entering and exiting trades.
  10. When used correctly options can be tools for managing risk, used incorrectly they can blow up your account. I suggest never risking more than 1% of your trading capital on any one option trade.

 

Livermore on speculation

  
  Education
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Just remember, without a discipline, a clear strategy and a concise plan, the speculator will fall into all the emotional pitfalls of the market and jump from one stock to another, hold a losing position too long, cut-out of a winner too soon and for no reason other than fear of losing the profit. Greed, fear, impatience, ignorance and hope, will all fight for mental dominance over the speculator. Then after a few failures and catastrophes, the speculator may become demoralized, depressed, despondent, and abondon the market and the chance to make a fortune of what the market has to offer.

Develop your own strategy, discipline and approach to the market. I offer my suggestions as one, who has traveled the road before you. Perhaps I can act as a guide for you and save from falling in some of the pitfalls that befell me. But in the end the decisions must be your own”.

10 Type of Traders.Which are You ?

  
  Education
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In the markets there are many different types of traders and many motivations that drive them.  Everyone has heard of  different types of traders based on their trading method: Swing Traders, Day Traders, Momentum Traders, etc. But what about different types of traders based on their psychology, their very purpose?  Some trade for fun and excitement, others trade purely for ego. Other love the game and still others are in it only to make money. In the greatest game on earth it is surprising that many traders have different motivations, in reality the only correct motivation is to make money, that should be the real goal of any trader. Here are a list of ten types of traders I have observed on social media. We have all likely been more than one of these types at some time or another while trading. But we need to focus like a laser on the only real reason we should be trading: to make money and once we have made it, to keep it.

  1. Greedy Traders: They trade too big and risk too much because their only goal is the easy money.
  2. New Traders: They have no idea how the markets work so their only goal is knowledge.
  3. Arrogant Traders: Their only goal is to prove they are right and satisfy their fragile egos.
  4. Trend Traders: Their only goal is to ride a trend and make money.
  5. Scared Traders: Their only goal is to not lose their capital.
  6. Perma-Bull Traders: Their only goal is to go long stocks.
  7. Perma-Bear Traders: Their only goal is to short stocks.
  8. Prophet Traders: Their only goal is to rightly predict market movement then let everyone know they did.
  9. Paper Traders: They love the market and study more than anyone but never quite make the plunge into real trading.
  10. Rich Traders: Their only goal is to consistently make money and grow their capital over the long term.

Which are you?

Livermore on knowing yourself

  
  Education
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It is my conclusion that playing the market is partly an art form, it is not just pure reason. If it were pure reason, then somebody would have figured it out long ago. That’s why I believe every speculator must analyze his own emotions to find out just what stress level he can endure. Every speculator is different, every human psyche is unique, every personality exclusive to an individual. Learn your own emotional limits before attempting to speculate, that is my advice to any one who has ever asked me what makes a successful speculator. If you can’t sleep at night, because of your stock market position than you have gone too far, if this is the case then sell your position down to the sleeping level.

On the other hand, I believe everyone who is intelligent, conscientious and willing to put in the necessary time, can be successful on Wall Street. As long as they realize the market is a business like any other business – they have a good chance to prosper.

India's GDP growth to crawl at 4.7% in second quarter: ZyFin

  
  Education
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Barely over a week ahead of release of the official GDP data, research and analytical firm ZyFin today estimated India’s economy to expand by 4.7% in the  second quarter of the current financial year. The methodology used by ZyFin is distinct  and it claimed that it uses variables  which are lead indicators to the official data. If GDP indeed grows by this rate, the Finance  Ministry’s hopes of  GDP growth between 5-5.5%  in 2013-14 may be dashed.  

 
In the first quarter of the current financial year, the GDP expanded at a four-year bottom of 4.4%. At that time, ZyFin had estimated a growth of 4.5%. 
 
“We still believe that the economy is in a crisis mode and much below what the economy used to grow at a pace of around 8%”, Debopam Chaudhuri, Vice President of Research and Development at Zyfin told Business Standard.
 
However, even if the economy grows at this pace, it would be at a year high — both according to official and ZyFin estimates. In the second quarter of 2012-13, the economic growth was higher at 5.2% as per official estimates and by ZyFin’s calculations it was 5.1%.
 
“While the estimates indicate a sluggish recovery, high inflation, weak consumer sentiment and a slowing services sector will constrain any sustained recovery”, said the firm. (more…)

Overcoming the Fear of Loss in Trading

  
  Education
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The fear of “pulling the trigger” stems mainly from the fear of loss. That same fear is responsible for 3 major actions or inactions that destroy traders:

  1. Cutting winners short. You take what you can and fear that if you don’t grab whatever small gains you have now, they would disappear.
  2. Keeping losers. You don’t dare to actualize your losses and hope that the trade will turn around.
  3. Unable to take every valid trade setup. You don’t dare to pull the trigger because you have associated the intense negative emotions of losing or the possibility of losing with being in a trade, so you escape from experiencing those feelings by not entering into a trade.

Psychology was never an issue when I was swing trading stocks, but has now become a major stumbling block when I am trading intraday futures. Hence I have just started to look into this.

All three psychologists mentioned the need to trade small. Other advice include doing visualization exercises, mindfulness exercises, and looking at the bigger picture.

I also found two resources with mindfulness training and a related webinar, links below.

Dr Brett Steenbarger

  • If it is due to lack of confidence in the system, back test and/or paper trade the system.
  • If it is due to fear of loss (Steenbarger calls it performance anxiety), do visualization exercises where you picture yourself in the stressful situation but doing the right thing and keeping yourself in the right frame of mind. Also paper trade and trade small. (more…)

10 Trend Commandments

  
  Education
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  1. You shall learn from successful trend followers to make big returns int he market.
  2. You shall follow the trend only, and have no guru that you bow down to.
  3. You shall not try to predict the future in vain, but follow the current price trend.
  4. You shall remember the stop loss to keep your capital safe, you shall know your exit before your entry is taken.
  5. Follow your trend following system all the days that you are trading, so that through discipline you will be successful.
  6. You shall not give up on trading because of a draw down.
  7. You shall not change a winning system because it has had a few losing trades.
  8. You shall trade with the principles that have proven to work for successful traders.
  9. You shall keep faith in your trend following even in range bound markets, a trend will begin anew.
  10. You shall not covet fundamentalists valuations, CNBC talking heads, newsletter predictions, holy grails, or the false claims of black box systems.

If you want news and entertainment watch Blue Channels, if you want to learn how to trade read AnirudhSethiReport.com

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