Always wait for the setup: no setup – no trade. Agree. If your strategy doesn’t provide you a good risk/reward trade to make, then your job is to be patient until it does. Ironically, this often requires you to sit out some very good moves in the market and be inactive at the very same times you want to be aggressive.- The best trades work almost right away. Agree, but with one important caveat – this rule greatly depends upon your strategy. Some strategies will require greater patience than others. If trading short-term, this rule is almost always correct, but if your time frames are longer, then you also have time on your side which requires more patience but that patience can pay off if your analysis is correct.
- Never take a big loss. If it doesn’t ‘feel’ right. Remove it! Disagree. Sometimes you have to take a big loss to prevent the risk of an even greater loss. Refusing to take a big loss when a mistake has been made can be very costly. I also disagree with the view that “If it doesn’t feel right, remove it.” Actually, some of the best trades you will ever make in your career are those trades that feel wrong and about as far from “right” as you can make it. Don’t believe me? Think over the last month or so about the trades you missed because they didn’t feel right but your strategy told you to hold or buy them anyway! It is also interesting to me that this rule says to trade by feel and at the same time advises in another rule not to trade by emotion. You can’t do one without the other!
- Always perfect your craft and sharpen your skills – good traders are constantly learning. Agree. No matter how skilled, intelligent, and successful you have been, there is always room for improvement. Moreover, because of the ever-growing changing nature of the market, what you do now to trade successfully won’t always work in every situation and the next market environment. Only experience and constant dedication to your job will provide you with the weapons for enduring market success.
- Be patient with winning trades – impatient with trades that fight back. Agree. Another good ways of saying – let your winners run and cut your losers short. The truth is that most individual traders and investors do the exact opposite – they sell winners too quickly and they hold losers far too long letting trades that went awry become long-term “trapped” investments. (more…)
Archives of “caveat” tag
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10 Rules for Traders
Always wait for the setup: no setup – no trade. Agree. If your strategy doesn’t provide you a good risk/reward trade to make, then your job is to be patient until it does. Ironically, this often requires you to sit out some very good moves in the market and be inactive at the very same times you want to be aggressive.- The best trades work almost right away. Agree, but with one important caveat – this rule greatly depends upon your strategy. Some strategies will require greater patience than others. If trading short-term, this rule is almost always correct, but if your time frames are longer, then you also have time on your side which requires more patience but that patience can pay off if your analysis is correct.
- Never take a big loss. If it doesn’t ‘feel’ right. Remove it!Disagree. Sometimes you have to take a big loss to prevent the risk of an even greater loss. Refusing to take a big loss when a mistake has been made can be very costly. I also disagree with the view that “If it doesn’t feel right, remove it.” Actually, some of the best trades you will ever make in your career are those trades that feel wrong and about as far from “right” as you can make it. Don’t believe me? Think over the last month or so about the trades you missed because they didn’t feel right but your strategy told you to hold or buy them anyway! It is also interesting to me that this rule says to trade by feel and at the same time advises in another rule not to trade by emotion. You can’t do one without the other!
- Always perfect your craft and sharpen your skills – good traders are constantly learning. Agree. No matter how skilled, intelligent, and successful you have been, there is always room for improvement. Moreover, because of the ever-growing changing nature of the market, what you do now to trade successfully won’t always work in every situation and the next market environment. Only experience and constant dedication to your job will provide you with the weapons for enduring market success. (more…)
Trading Wisdom-One Liners
- Look at your trading as a series of probabilities, don’t focus on any single profit or loss.
- Want what the market wants.
- Do your homework. Come prepared to each day’s trading.
- Never take a trade on the open in the direction of a that day’s gap.
- Don’t risk too much of your trading capital on any single idea.
- Remain flexible.
- Believe what you see. If the market’s going up or down, it’s going up or down.
- Anything can happen. The wildness lies in wait.
- Verify your trading methods or systems.
- Caveat emptor (“Let the buyer beware.”) when buying a trading system or hiring a mentor.
- Your own personal psychology will express itself regardless of your chosen method.
- An opinion isn’t worth much, your own or someone else’s.
- Watch how the markets react to the news.
- Learn from your mistakes.
- Stay in the now. Don’t trade yesterday, today. Don’t trade tomorrow, today.
- Don’t worry about a missed opportunity. Another one is on the way. Besides there were several that just passed of which you were totally unaware.
- If you don’t risk, you can’t make money. If you lose all your trading capital, you can’t trade. Find balance.
- Markets don’t go in a single direction. The trend will wobble on it’s way to its destination.
- The trend is your friend. Unless you’re a counter trend trader, and then only it’s end is your friend.
- Tomorrow’s another day, a whole new trading opportunity. Be optimistic.
- Forgive yourself. Take the lesson, and move on.
Types of People and Views on Market
What are the many types of people who disseminate their views about the market? What are the major categories that I am missing or what is a better way to classify and make this useful?”
No doubt, there is a book to be done on the subject. That said…
This list is presented in order of published appearance. A caveat: “many fall into more than one category and mobile via age and wealth changes.”
The Connected Person, who makes you feel without saying it that she/he is or will be connected to the very lynch pin of policy at the Interior or some such.
Tout, who has position and wants you in for his/her favor.
Sponsor, who advertises or sponsors programs that treat him/her well.
Would-be-manager without funds impresses with his/her knowledge/ideas for you to join.
Old lion, who is not virile but still fights younger from replacing him/her in power/ romance.
Curmudgeon, who hates everything modern and wants all back to old days before tech.
Spankist, a beauty but aggrieved to give spanking unless things in order her/his way; observed to be everywhere and influence growing among spankisto and spankista’s.
Iconoclast, who is always contrary, never reads papers or travels, and feels market is wrong.
Hole-In-Shoes, who only drinks coke and eats hamburgers, never pays a fee more than 10%.
Sanctimonious, who pretends to be honest while blind to any firm dishonesty/misdoing.
Academic-Consultant, who manipulates numbers retrospectively to allure investors.
Mystic, who looks at stars and bent keys.
Old Timer, who is guided by iron castings reports and freight car loadings and newsprint figures [sample]: all as timeless methods (non retro) with healthy respect for knowledge.
Fund Manager, who is quoted as “good buy” on stock that he/she sold bulk of before recall.
Jack of All Trades, who explains every rise and decline due to (un)certainty about earnings and rates and other well chosen factors. Always welcome on TV because of his versatility. (more…)