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Trading Principles

  
  Education
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• In life, as in trading, the right mindset is crucial for success. You must be confident in your decisions because they are based on cause and effect, not on emotions or opinion. Negative people who are unsure of themselves are not successful in any field. You need faith in yourself and your methods to be able to persevere and not give up before reaching success.

• You can risk too much and lose it all in your business, life, marriage, friendships or family. You have to measure the potential cost of every action. One affair can cost you your marriage, just like one big trade with too much risk can cost you all your capital.

• In business there are certain methods which bring in customers and turn a profit, and others which cause a business to turn away customers and lose money. Trading is similar: methods which turn a consistent and long-term profit are essential for success.

• Having unrealistic expectations in a marriage, job, or business will lead to unhappiness and failure just like it will in trading. You have to set realistic expectations so
you do not get discouraged easily and quit in any of these areas. You have to be satisfied that the results are worth your effort over the long term. You need to understand what to expect before you begin a marriage, a job, a business, or trading.

• Those who succeed in all areas of life are the ones who can manage stress the best. The best way to manage stress is to increase what you can handle step by step so that you grow into new circumstances. Another way to manage stress is to avoid actions which get you into situations you are uncomfortable with.

JOHN KENNETH GALBRAITH ON STOCK MARKET MEMORY LOSS

  
  Education
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Where else but in the markets can short term memory loss be both beneficial and profitable?

John Kenneth Galbraith, an economist, says the financial markets are characterized by…

“…extreme brevity of the financial memory.  In consequence, financial disaster is quickly forgotten.  In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world.  There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].

10 Money Lessons from Billionaires

  
Analysis, Education
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Billionaires have changed the way our world works. They’ve altered the way we communicate, travel, and live. And along the way, they have made incredible amounts of money for their efforts.

 Learning from the 10 billionaires below is not only a good idea if you want to boost your bank account, but also if you want your work to make a difference.

With that in mind, here are 10 lessons from billionaires on earning money, succeeding in business, and finding happiness in life.

1. “You become what you believe. You are where you are today in your life based on everything you have believed.” —Oprah Winfrey, net worth of $2.7 billion

First and foremost, you have to believe that greatness is possible. Many of the world’s billionaires have shifted the way our world works, because they believed that they were capable of doing something that was previously impossible.

Change is possible. Greatness is possible. But you can’t do anything unless you first believe in yourself.

2. “What we say here every day is that our success is really based on our members’ success, our community’s success.” —Pierre Omidyar, net worth of $6.7 billion

Your success is directly tied to how much you do for others. It’s not what you know. It’s not who you know. It’s what you do for who you know. Success follows generosity.

3. “The typical human life seems to be quite unplanned, undirected, unlived, and unsavored. Only those who consciously think about the adventure of living as a matter of making choices among options, which they have found for themselves, ever establish real self-control and live their lives fully.” —Karl Albrecht, net worth of $25.4 billion (more…)

Focus & Discipline

  
  Education
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The stock market is always one step ahead of you. The sooner you accept this fact, the better for your trading results. It helps to think of the market like the rabbit on the rail at the greyhound racetrack. As an investor, you should never mistake yourself for the rabbit or else the market will have to humble you and remind you that you are just a dog. The best you can expect to be is a greyhound in close pursuit, tethered to this market rabbit by an invisible rope. The fact is that the market rabbit is not really in the race. You are racing your fellow greyhounds. They are the ones whom you want to stay out in front of.

The questions you should ask are twofold. The first question is how to stay tethered to this rabbit. The second question is how closely tethered you actually want to be. Candidly answering the first may result in your answering the second by default. So focus on the first question and then ask yourself this: what you are willing to do each day to maintain your connection to the market? Your personal daily circumstances as well as your emotional commitment and discipline should guide you to generate a reasonable answer. With those inputs, you can then decide whether you allocate 30 minutes a day or 30 minutes a week. (more…)

Don't be a mouse.

  
  Education
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mouseI want to share with you an old fable that I’m sure you already know. It is about the mouse that roared.
Once up on a time, there lived a little mouse. He lived in constant fear of a cat that lived in the village. One day, a powerful space alien magician came to town. “M’lord,” the mouse begged of him, “thou art wise and powerful, and my life is most miserable because of a cat. Woudst thou return joy into my life by making me into a cat? Then I would no longer live in fear.”
The magician smiled, raised his wand, said some magical words, drew some lines on a chart, and the mouse found himself a cat as he wished. But, he was the most frightened (more…)

FEAR

  
  Education
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How to prevent Fear in trading ?

you have decide to trade a particular system. you get an entry signal, and put on the trade. You put in your protective stop, and you know what will be your signal or target for exit. There is nothing more to you need to do or worry about. The market will do the rest for you. You are along for the ride, and you know when to get out. So there is nothing to be fearful about …

“There is hardly anything productive about worry or fear when you cant do anything about the circumstances” by Buzz Aldrin

Fear is an emotion. It is created by us and therefore we can uncreated it. Fear is created when we think that our trade will lose a lot of money or things that will prevent our trade from losing. The keyword is think which is thoughts in our mind. When you keep on thinking of the thoughts of losing money and fearful of it. STOP!! Take a deep breath to break your connection. Then ask yourself, “Is this probable?” Continue to challenge the thought by asking, “What are the probabilities right now?” Then choose to take control of your thoughts and think term of the current probabilities.
Fear will lead you to disaster if you do not know how to release it. Another way to release fear is to have a shower to calm down yourself. (more…)

Anger

  
  Education
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As traders, fear and greed are the two emotions that we commonly handle in our trading decisions.

But I believe another emotion that we also sometimes experienced would be – anger.

Most traders have learned to be calm and sensible during trading. But there would certainly be times times when we fumed at missing out a fantastic trade, for not buying more contracts of a great trade, or frustrated for committing that same trading blunder again.

We would blame just about anything or anyone when our trading suffered. Somehow we didn’t realize that the anger have originated from us.

I recently read a book called “Zero Limits” co-written by Dr Joe Vitale & Dr Hew Len. The book was quite an eye-opening read. It mentioned that we are the one who are fully responsible for any circumstances which are happening within & around us.

When we encountered another person pouring out his or her frustrations, whether they were meant for us or not, we should accept that we were partly responsible for that happening, since his or her frustrations had come into our lives.

Naturally, we are responsible for our own anger too.

The way to resolve this would be, strange it may sound, is to keep cleansing ourselves by constantly repeating the phrases “I love you”, “I’m sorry”, “Please forgive me” and “Thank you” to ourselves.

According to the book, these are simple but powerful words that we convey to the Divine. We connect to the Divine by expressing our love and gratitude to him. At the same time, we seek the Divine’s forgiveness of our wrong doings.

Saying these 4 phrases will cleanse the memories of greed, fear and anger associated with anything (including trading) as we give in to the Divine to handle the situation for us.

We would experience a peace of mind that the Divine is taking care of us. Another positive outcome of cleansing ourselves is that we are now open to receive the inspirations from the Divine for us to act upon.

I encourage you to read more about this ancient Hawaiian practice called Ho’oponopono from “Zero Limits” to experience this positive feeling.

I hope that in time you will gradually banish your anger not only in your trading but also in other parts of your life.

“I love you”, “I’m sorry”, “Please forgive me”, “Thank you”.

Mark Douglas : Trading in the Zone

  
  Education
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Without doubt the foremost reading, it seems, in trading circles. Douglas’ book, in my view, deserves its place at the top of a traders reading list. Whether you are trading currencies, commodities, stocks or futures this book will have something for everyone. The book tackles the psychology involved in being a successful trader. The book attempts to give the reader the tools to develop the Confidence and discipline to become and consistent winner.

I think the book is a superb read and although I cannot say right now how succesful it has been, it is one of the few books that I pick up nearly every day and read another chapter again and remind myself of some of Douglas’  inspiring ideas and thoughts.

The book ends with a great 20 trades learning excercise that is a must.

The key learnings I get from reading this book :

1)The market is random; you cannot predict it. Unless you know every individual who has a position in the market and you know their strategy for each trade it is impossible to know what will happen next.Give up trying to predict, and focus on the now moment and managing yourself , your money and your strategy.

2)The Power of Association. Douglas uses throughout the book a story about a boy and his fear of  dogs. He uses this analogy to describe how previous experiences that have given pain, or expected pain, to us will mean that our mind will do everything possible to protect itself from future pain when it is exposed to similar circumstances at some point again in the future. i.e. If you recognise a market pattern where previously you lost a trade you will be compelled to exit the trade at that point or not take that trade on; because you will not want to experience pain. Douglas again talks about the here and now and describes how we can overcome these internal obstacles.

101%….Don’t miss to Read this Book !!!!

Profile Of The Successful Trader

  
  Education
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Trading is being young, imperfect, and human – not old, exacting, and scientific. It is not a set of techniques, but a commitment. You are to be an information processor. Not a swami. Not a guru. An information processor.

Participating in the markets can only develop your trading skills. You need to become a part of the markets, to know the state of the markets at any given time, and most importantly, to know yourself. You need to be patient, confident, and mentally tough.

Good traders offer no excuses, make no complaints. They live willingly with the vagaries of life and the markets.

In the early stages of your trading career, pay attention not only to whether you should buy or sell but also to how you have executed your trading ideas. You will learn more from your trades this way.

Never assume that the unreasonable or the unexpected cannot happen. It can. It does. It will.

Remember, you can learn a lot about trading from your mistakes. When you make a mistake – and you will – do not dwell on the negatives. Learn from the mistake and keep going.

Never forget that markets are made up of people. Think constantly about what others are doing, what they might do in the current circumstances, or what they might do when those circumstances change. Remember that, whenever you buy and hope to sell higher, the person you sell to will have to see the same opportunity at that higher price to be induced to buy.

Traders who lose follow one of several typical patterns. Some repeatedly suffer individual large losses that wipe out earlier gains or greatly increase a small loss. Others experience brief periods during which their trading wheels fall off: they lose discipline and control and make a series of bad trades as a result.
Wise traders make many small trades, remain involved, and constantly maintain and sharpen their feel for he market. For all of their work, they hope to receive some profit, even if it is small in terms of dollars. In addition, continual participation allows them to sense and recognize the few real opportunities when they arise. These generate large rewards that make the effort of trading truly worthwhile.

At the end of the chapter he lists specific observations that have a high enough probability of reoccurring he considers them rules:

  • If you find yourself holding a winning position, adding up your profits, and confidently projecting larger gains on the horizon, you are probably better off exiting the trade. The odds are that the trade has run its course.
  • When entering a trade with a market order and your fill is clearly better than expected, odds are it will end up being a losing trade. Good fill, bad trade. Get out!
  • If all your ‘trading buddies’ agree with your expectations regarding the next big move, it probably will not work out. If everyone’s conviction level is as strong as the consensus, do the opposite.
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