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.
5) Controlling Risk – The really fine traders are quick to acknowledge when they’re wrong, so that they can rapidly exit marginal trades and keep their powder dry for future opportunities. They have set amounts of money that they’re willing to risk and lose per day, week, or month and they stick with those limits. This slows them down during periods of poor performance so that they don’t accumulate losses unnecessarily and have time to review markets and figure things out afresh.
6) Self-Improvement – I’m continually impressed at how good traders sustain efforts to work on themselves–even when they’re making money. They realize that they can always get better, and they readily set goals for themselves to guide their development. In a very real sense, each trading day becomes an opportunity for honing skills and developing oneself.
Archives of “chase” tag
rssPatience is a virtue
As a professional trader I still get all the urges to system chase and break the rules as much as anyone, but the key is learning how to control those urges.
This week has seen some fantastic set ups in the market, and I have known which way the price would likely move thanks to the powerful tools I have at my disposal, but the problem has been that the price just hasn’t been retracing to the levels that I have been waiting at.
This can cause some people to want to just jump in because they have been right about the overall direction the last 10 times, or even worse some people may even be tempted to enter the market without using a stop loss thinking that the price will come their way in the end.
These urges and acting upon them show a lack of patience and discipline and this is what the market punishes the most. (more…)
Why We Fear Simple Money Solutions
I keep coming across an interesting problem. People say they want things to be simpler — investing, life insurance, retirement planning, etc. But when a simpler (and effective) option is proposed, they reject it as too simple.
In most of the money situations I’ve come across, the best solution is almost by definition the simplest. (Note: I didn’t say the easiest.)
So why don’t we go for simple?
1) We don’t believe it will work.
We’re attracted to complexity because anything that requires a lot of something — time, details, money — should work, right? By default, if it’s simple, say only two steps instead of ten, we think we’re missing out.
2) We think simple should be easy.
It’s like the guy who goes to the doctor and says he doesn’t feel well. There must be something wrong with him that a pill could fix. But all the doctor says is, “Get more sleep, eat healthier food and exercise three times a week.” (more…)
Stubbornness
If it doesn’t pay off the first time forget it.
Perseverance is a good idea for spiders and kings, but not always for speculators. Don’t fall into the trap of trying to squeeze a gain out of any single speculative entity.
Don’t chase any investment in a spirit of stubbornness. Reject any thought that an investment “owes you” something. And don’t buy the alluring, but fallacious idea that you can improve a bad situation by averaging down.