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1 Thing Critical To A Trader's Success

  
  Education
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I think more than anything it has to be discipline. Because as important as finding a suitable methodology, developing a strategy, sound risk management, and position sizing is, it will be for nothing if you don’t have the discipline to consistently execute it and follow your rules.

Discipline is an integral part of all trading, whether systematic or discretionary, day trading or buy-and-hold, across all asset classes. I don’t believe you can be consistently successful without it.

Risk control based on risk per trade, risk control based on sector, risk control based on total portfolio.

You must know how much you can lose on a given trade, and the maximum loss to your entire portfolio at any one time. Only then can you take the necessary measures to manage these risks.

Almost equally important is correct trading psychology. Being able to accept trades that do not work. Staying focused and strong in the complete uncertainty of trading.

Because even the best trading system will have losing periods and this is when you need to remain discipline and continue executing your trades.

A trader must have many different ingredients to be successful in trading, but what is absolutely critical is that you must love the type of trading you do.

Many people think they have a passion for trading but the reality of trading; watching charts, managing risk all day, is not as exciting as many believe. If you are a day trader then you must actively enjoy this process.

If not, you must find another form of trading (or profession) that suits your style. That might be swing trading, automated trading, systems trading, whatever. But what you must have is passion!

Hope & Fear

  
  Education
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In trading most new traders allow hope and fear to dictate their trading. They have a losing trade and instead of selling it and getting out they instead hope it will come back to even allowing the loss to grow. Another error  for new traders is that when they have a winning trade they fear that the profit will disappear so they sell for a small gain and miss the big trend in their favor. When hope and fear controls the trader they end up with big losses and small gains. A formula for ruin.
Instead the rich trader is fearful of losses getting bigger so they sell quickly when losing, risking a maximum of 1% of their capital on any one trade. Rich traders are able to think clearly and trade rationally knowing exactly what they are risking, when their stop is hit, they get out. This enables them to keep all their losses small.
When a trade is immediately a winner for a rich trader they hope it will run 100 points in their favor. Rich traders enable this to be possible with a trailing stop, they do not get out of a winning trade until a key price reversal has happened that tells them that the trend is actually reversing.
Rich traders are fearful of losses growing bigger and hope that their winners will continue on a monster trend. This mindset allows  them to be on the right side of trends and avoid any huge losses. This is why the best traders in the world are trend followers and win consistently. Do you want to join their club? Then do not let fear and hope dictate your trading decisions use them correctly.

Bad NEWS Continues For BRAZIL

  
Analysis, Education
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BRAZIL2Brazil’s economic growth continues to disappoint.

After data in December showed Brazil’s economy shrank in the third quarter of last year for the first time since 2009, the central bank’s IBC-Br index, a monthly proxy for gross domestic product, showed economic activity fell 0.3 per cent in November from a month earlier.

The market had been expecting an increase of 0.1 per cent for November.

The surprise contraction comes just two days after the central bank voted unanimously to raise its benchmark Selic rates by a larger-than-expected 50 basis points to 10.5 per cent.

The aggressive move is aimed at tackling the country’s high inflation, which hit 5.91 per cent last year. (more…)

Top 5 Quotes From Market Wizard Ahmet Okumus

  
  Education
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“I spend a hundred hours a week on research.” – Ahmet Okumus

While we spend our time researching different things, Okumus and I both share the drive to learn as much as we can about our investments. Okumus spends his time studying fundamentals, while I have been spending my time studying trading systems and successful traders.

Regardless of what you are studying, a strong desire to learn is obviously very important to trading success.

“On average I would say 35 percent school and 65 percent stock market, but the stock market percentage kept going up over time. By the beginning of my senior year, I was devoting 90 percent of my time to the stock market, and I quit school altogether.” – Ahmet Okumus

Okumus is discussing the amount of time he invested in studying for school vs studying the stock market while in college. This stuck out to me because it reminded me of my college days. I was bored by most of the classes I was forced to take, so I would bring my own personal studies to class with me and work on that, completely ignoring professors.

Unlike Okumus, I did stick it out and finish school. I am not sure that that was a good decision though.

“My main goal is not to lose money.” – Ahmet Okumus

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13+1 Habits For Traders

  
  Education
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1.    Have a plan before you initiate a trade. A detailed trading plan is your blueprint to success. It will help you define you as a trader, the way you trade, will help you find, execute and manage trades with ease and most importantly will help you put the education puzzle together. 
2.    Always analyze all closed trades, winners and losers. Having a trading journal will help you identify what works for you and what not; it will funnel you in the right direction. It is by far the most helpful method of personal trading introspection. 
3.    Maintaining a positive trading attitude will improve your money management and risk management skills. A negative trading mentality will alter your thinking and mindset. Your attitude will determine whether or not you are profitable with your trading. Your attitude is more important than your market knowledge and even your level of experience. It is important how you react to the market and not what the market will do to you.
4.    Controlling Emotions. Emotional swings and emotional stresses impact your mental state of mind and will affect your trading decisions. When you trade with emotions you don’t trade clearly and rationally. Some books talk about separating your emotions from trading. But how is this possible?  To even try to separate emotions is like fighting a losing battle, taking control over them that is a different story. Trading involves the most emotional COMMODITY in the world which is….money. Money outlasts hate, love, greed and anything else you can ever imagine. The only way to control your emotions as a trader is to have a solid trading plan.
5.    Trade in the zone –Focus is key in trading. Make sure you are do not have any distractions around, no internet browsing, no phone answering, no kids playing, it should be just you and the charts. Let the charts speak to you and they will tell you what to do.  (more…)

10 Trading Pitfalls

  
  Education
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  • All market behavior is multifaceted, uncertain, and ever changing.
  • “I am employing a robust, positive expectancy trading model and am appropriately managing risk on each and every trade.  Losses are an inevitable and unavoidable aspect of executing all models.  Consequently, I will confidently continue trading.”
  • Denial of loss and uncertainty is extremely destructive because it prevents us from thinking in terms of probabilities, planning for the possibility of loss, and consequently from the necessity of consistently managing risk.
  • If we view markets as adversarial we cut ourselves off from emotionally tempered, objective solutions to speculation (opportunities to profit)
  • Blind faith is no substitute for research, methodical planning, stringent risk management, playing the probabilities, and unwavering discipline
  • Depression is a suboptimal emotional state because it allows past losses or missed opportunities to limit our ability to perceive information about the markets in the present
  • We are not our trades; they are merely an activity in which we are engaged
  • Greed is linked to fear of regret, which is the greatest force impeding a trader’s performance outside of fear of loss
  • Market offers limitless opportunities for abundance
  • Trading biases prevent us from objectively perceiving reality, thereby limiting our ability to capitalize on various opportunities in the markets.

Speculators, Skeptics & Suckers

  
  Education
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  • Speculators jump into stocks in the late stages of a Bear market and into the early stages of the Bull market; they are the gamblers; and they are willing to accept higher relative risk to capture the largest price movements that occur later, when the Skeptics and Suckers are buying in larger numbers.
  • Skeptics wait for the Speculators to make the first move and to see real evidence of economic recovery before buying into a Bull market. Skeptics don’t jump in; they move in increments; and they usually miss the biggest price movements, both up and down. Put simply, Skeptics make their money when neither fear nor greed are at peak levels.  There is also a sub-category of Skeptic, which are the Contrarians, who are skeptical to the degree that the most prudent position is the opposite of the herd.
  • Suckers will buy or sell at any point during a market cycle but tend to buy more at higher price levels and sell more at lower price levels; therefore, as a whole, Suckers are the last to join a Bull market and the last to abandon it.

These are generalizations and most investors will exhibit characteristics of all three types at various points of a market cycle.  For example, at the market cycle extremes–the highest and lowest points–many Speculators and Skeptics become Suckers.  Also, there are hybrid forms (e.g. Speculative Suckers, Skeptical Speculators, Perma-Suckers, and so on).

$60 Trillion Of World Debt In One Visualization

  
Analysis, Economy, Education
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Today’s visualization breaks down $59.7 trillion of world debt by country, as well as highlighting each country’s debt-to-GDP ratio using colour. The data comes from the IMF and only covers external government debt.  

It excludes the debt of country’s citizens and businesses, as well as unfunded liabilities which are not yet technically incurred yet. All figures are based on USD. 

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All Type of Traders Are Trying To Catch Trend Only

  
  Education
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  1. Long term trend followers are trying to be right about the long term trends in the markets they trade using mechanical systems.

  2. 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. 

  3. 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.

  4. Day traders are trying to capture the trend that happens in one day’s time frame.

  5. Swing traders bet that the trend reverses off support or resistance levels and give them a profit.

  6. Can Slim traders are trading the trend of a hot growth stock out of a base price range or cup with handle pattern

  7. Bear are betting that the trend reverses and something goes down in value and they make money.

  8. Call buyers are trying to capture an up trend, call sellers want to profit from a down trend.

  9. Put buyers are trying to capture a down trend, put buyers want to profit from an up trend.

  10. 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.

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