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A Trader’s 5 Best Teachers

  
  Education
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Trading Losses: There are two types of losses, one loss is caused by the market simply not being conducive for the profitability of your system. The other loss is due to your lack of discipline causing your system not to work. If you followed your trading plan and had a loss that is to be expected. If you are trading a proven and tested method then you have simply learned that taking a loss is simply part of trading. However if your breach of discipline caused your loss, whether not taking a stop, over riding your plan, not taking an entry, trading too big, etc. then it is time to learn why you had the loss. Ego? Fear? Greed? Overconfidence? Laziness? and many other things cause losses. It is crucial that you learn why you broke your trading plan so you do not repeat the mistake again.

Charts: Studying the past price action of charts is very educational. It will show you how prices have reacted at  support/resistance levels in the past along with moving averages and any other indicators that you may choose. It is important that you understand how your market has historically traded whether it is currencies, commodities, stocks, or bonds. It is crucial that you learn how to identify a trend, a swing trade, and a range bound market. (more…)

Jim Rogers: Stocks To Be Crushed Any Day Now

  
Analysis, Education, Global Indices
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Governments need to tighten their monetary policies more according to Jim Rogers. Such tightening will result in stocks being crushed nevertheless.

Bloomberg: “We’re overdue for a correction” said Rogers, chairman of Rogers Holdings, said in an interview in Hong Kong. “Stock markets around the world have been going up for the past 10 months.”

“I don’t think anybody has tightened enough. I think everybody should tighten more,” he told Bloomberg. “We have huge amounts of money printed throughout the world. It’s going to cause currency instability. It’s going to cause more inflation. It’s going to cause higher interest rates.”

An extended, related video of Jim Rogers with Bloomberg is below, start from 11:00 for Jim Rogers. He talks across stocks, stimulus, commodities, and gold in particular.

One of the oddest things discussed however, toward the very end of the video, at 27:00, is how Jim Rogers is long both the U.S. dollar and gold. He’s also long the Japanese yen even though in his own words, it, like the dollar, is a ‘terribly flawed currency’.


 

 

Great Nuggets from the Book-A Better Way to Make Money.

  
  Education
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1.  The secret to losing money in the market is to know why.  “The losers “were ‘playing the market’, not using it intelligently.  The fellow at the other end of the deal, who was using it intelligently, not ‘playing the market’, is the one who got the money.”

2.  “It is an undeniable fact that indiscriminate trading in a hectic market will send one to financial oblivion quicker than any other known process.”

3.  “The most careful preparation-a systematic plan-is one of the essentials of success.”

4.  “Market action is not complex but surprisingly simple.  Yet it is often made to appear complex by newspaper forecasters and market letter writers.”

5.  “Market action is human nature in action.”

6.  All market movements are based on “two deep-seated and entirely natural emotions:  the desire for gain and the fear of loss.”

7.  “So anxious are people to find some talisman, some magic wand, that will help them secure the hidden riches of the market, that they will try anything from coin-flipping to crystal gazing to secure the desired assistance.”

8.  “What marvelous results could be attained in the business of making money if those who buy stocks would take a little time to learn a few simple facts about the market in which they are blindly reposing their faith.”

9.  “Market students are continually diverted from making true evaluations of securities and commodities because they study the statistics made by prices instead of the psychology of prices.”

10.  “Adopt one system of trading and stick to it, just as you employ and stick to one physician in whom you learn to have confidence.”

11.  “One of the most important points in your market education is to learn as early as possible that the customary and supposedly weighty market news is of very small importance.  The news only looks important.”

12.  “Don’t trade just because you can afford to lose.”

13. “Practice makes perfect is an old copybook adage that works well in the market place.”

14.  “If a trade fails to come out right, the error will be found in the operator-not the market.”

15.  “Trading is simple another form of business.  Treat it as such.”

16.  “Trend to the investor is like the vein of gold to the miner, who must follow the vein faithfully if he expects to get the yellow metal.”

17.  “Stocks are made to buy and sell…not to be bought and held.”

18.  No matter what a thing costs, stocks or otherwise, “it is worth only what you can somebody to pay for it.”

19.  People will always be prone to be extravagantly optimistic or dolefully in the slumps and “in this action is unlimited wealth for the men who realize this fact and will use it with confidence and decision.”

20.  “Success is the most desirable thing in the world, but it is an eliminating contest.  It may trample the thoughtless trader into the dust, but it will pour large treasure into the laps of those who work in sincere harmony with its laws.”

36 Steps To Becoming A Better Trader

  
  Education
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1. We accumulate information – buying books, going to seminars and researching.
2. We begin to trade with our ‘new’ knowledge.
3. We consistently ‘donate’ and then realise we may need more knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our ‘updated’ knowledge.
7. We get ‘beat up’ again and begin to lose some of our confidence. Fear starts setting in.
8. We start to listen to ‘outside news’ and to other traders.
9. We go back into the market and continue to ‘donate’.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get ‘over-confident’ and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated.

MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.

15. We get serious and start concentrating on learning a ‘real’ methodology.
16. We trade our methodology with some success, but realise that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when we execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don’t follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.

Donchian's 20 Trading Guides (First publication: 1934)

  
  Education
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General Guides:

  1. Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move.

  2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.

  3. Limit losses and ride profits, irrespective of all other rules.

  4. Light commitments are advisable when market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing.

  5. Seldom take a position in the direction of an immediately preceding three-day move. Wait for a one-day reversal.

  6. Judicious use of stop orders is a valuable aid to profitable trading. Stops may be used to protect profits, to limit losses, and from certain formations such as triangular foci to take positions. Stop orders are apt to be more valuable and less treacherous if used in proper relation the the chart formation.

  7. In a market in which upswings are likely to equal or exceed downswings, heavier position should be taken for the upswings for percentage reasons – a decline from 50 to 25 will net only 50% profit, whereas an advance from 25 to 50 will net 100%

  8. In taking a position, price orders are allowable.  In closing a position, use market orders.”

  9. Buy strong-acting, strong-background commodities and sell weak ones, subject to all other rules.

  10. Moves in which rails lead or participate strongly are usually more worth following than moves in which rails lag. (more…)

Re-Evaluate

  
  Education
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Re-EvaluateBe willing to stop trading and re-evaluate the markets and your methodology when you encounter a string of losses. The markets will always be there. Gann said it best in his book, How to Make Profits in Commodities, published over 50 years ago: “When you make one to three trades that show losses, whether they be large or small, something is wrong with you and not the market. Your trend may have changed. My rule is to get out and wait. Study the reason for your losses. Remember, you will never lose any money by being out of the market.”

10 Trading Mistakes !

  
  Education
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tradingmistake1

  1. Refusing to define a loss.
  2. Not liquidating a losing trade, even after you have acknowledged the trade’s potential is greatly diminished.
  3. Getting locked into a specific opinion or belief about market direction. From a psychological perspective this is equivalent to trying to control the market with your expectation of what it will do: “I’m right, the market is wrong.” [private] (more…)

The Broker and The Dead Donkey

  
  Education
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brokerndonkey

A broker named, Jean Paul, moved to Texas and bought a donkey froman old farmer named Ben for $100. The farmer agreed to deliver thedonkey the next day.
The next day, Ben drove up and said, “Sorry, but I have some bad news.The donkey died.””Well, then, just give me the money back,” said the broker”Can’t do that. I went and spent it already.” Replied Ben”OK, then. Just unload the donkey,” said Jean Paul.”What ya going to do with him?” asked Ben.”I’m going to raffle him off,” said Jean Paul.”You can’t raffle off a dead donkey!” uttered Ben.”Sure can. Watch me. I just won’t tell that he’s dead,” said Jean Paul.A month later Ben met up with the Cajun and asked, “What happenedwith that dead donkey?””I raffled him off, I did. I sold 500-hunderd tickets at two dollars apieceand made a profit of $898,” said Jean Paul.”Didn’t anyone complain?” inquired Ben.”Just the guy who won. So I gave him his two dollars back,” said the broker

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