Archives of “confidence” tag

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The Stock Trader's circle of Sucess and Failure

  
  Education
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The following graphic describes two types of traders.  The first (the circle on the left) describes what I believe to be the characteristics of all beginning traders, most of which end up quitting.  There is a progression here from bad to worst.  However, if the beginning trader can break through this cycle somewhere around undisciplined fear (#3) and paralysis of analysis (#4), the chances of his success improves exponentially.

TWOTYPETRADERS

THE LOSER’S CYCLE OF DESPERATION

Simply put, a trader enters the stock market with little if any knowledge about what to expect.  How can he?  No experience = no knowledge.  Not only that, but his expectation of untold riches distorts his perception of reality.  Once in the market he seeks the holy grail that will make him rich.  When he doesn’t find it he continues his search as fear begins to shackle his feet.  The fear leads to paralysis of analysis or the thinking that the more indicators and patterns and candlesticks etc. that he uses the more likely he will win.  Wrong!  (more…)

10 Attributes Exceptional Traders possess

  
  Education
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  1. A persistent unquenchable motivation to compete and achieve personal stock market mastery
  2. A personally developed hands-on strategy in writing that fits your personality.
  3. The ability to be brutally honest and objective about your beliefs and weaknesses.
  4. An inner resiliency to weather all market storms with little emotional scar tissue.
  5. Well-defined risk management rules and an ability to accept responsibility for losses.
  6. Unassailable confidence in your system and yourself.
  7. Discipline to follow your methodology and act decisively.
  8. A strong ethic for working hard but also working smart.
  9. Patience and an ability to wait for high probability trades to materialize.
  10. A willingness to embrace change, to modify your thinking, to rewrite your methodology and transform yourself.

Thinking Can Make Impossible Become Possible

  
  Education
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I am sure that all of us have seen the statue of The Thinking Man. It is an amazing sculpture that evokes in individuals many different emotions and ideas.

As a trader, if we are always worrying about what might happen if we do this or do that and if it is wrong that we will lose money, then we will rarely if ever have a successful session.

I submit that if we take time before we begin a trading session to think about all of the correct decisions we will make, all of the good trades we will execute, all of the money management actions that we will adhere to and so much more, then we will be so far ahead of multitudes of other traders.

When we take time to think about what we desire to accomplish and what skill sets we have and how we will put them to use while we trade, when the session is over we will many times be amazed at what we have accomplished.

Don’t begin trading with thoughts of it being impossible to succeed or else your results will match those thoughts. Fill your thoughts with confidence and focus on what you truly desire to happen and then let yourself just go ahead and make it happen.

One Liners

  
Education, Life
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1. Once, all villagers decided to pray for rain, on the day of prayer all the People gathered but only one boy came with an umbrella…THAT’S FAITH
2. When you throw a baby in the air, she laughs because she knows you will catch her…THAT’S TRUST
3. Every night we go to bed, without any assurance of being alive the next Morning but still we set the alarms in our watch to wake up…THAT’S HOPE
4. We plan big things for tomorrow in spite of zero knowledge of the future or having any certainty of uncertainties…THAT’S CONFIDENCE
 
5. We see the world suffering. We know there is every possibility of same or similar things happening to us. But still we get married??..THAT’S OVER CONFIDENCE!!

Discipline Trading

  
  Education
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-The market pays you to be disciplined.
-Be disciplined every day, in every trade, and the market will reward you. But don’t
claim to be disciplined if you are not 100 percent of the time.
-Always lower your trade size when you’re trading poorly.
-Never turn a winner into a loser.
-Your biggest loser can?t exceed your biggest winner.
-Develop a methodology and stick with it. don?t change methodologies from day to
day.
-Be yourself. Don?t try to be someone else.
-You always want to be able to come back and play the next day. Once you reach
the daily downside limit, you must turn your PC off and call it a day. You can always come back tomorrow.
-Earn the right to trade bigger. Remember: if you are trading poorly with two lots you
must lower your trade size down to a one lot.
-Get out of your losers.
-The first loss is the best loss.
-Don?t hope and pray. If you do, you will lose.
-don?t worry about news. it?s history.
-Don?t speculate. if you do, you will lose.
-Love to lose money. What I mean is to accept the fact that you are going to have
losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly.
-If your trade is not going anywhere in a given timeframe, it?s time to exit.
-Never take a big loss. Only a big loss can hurt you. consistency builds confidence and control.
-Learn to sweat out (scale out) your winners.
-Make the same type of trades over and over again ? be a bricklayer.
don?t over-analyze. don?t procrastinate. don?t hesitate. if you do, you will lose.
all traders are created equal in the eyes of the market.
-It?s the market itself that wields the ultimate scale of justice.

Mark Douglas makes some great statements

  
  Education
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In the book Trading In The Zone, Mark Douglas makes some great statements that I truly believe are important.  He states:

I AM A CONSISTENT WINNER BECAUSE:

  • I objectively identify my edges
  • I predefine the risk of every trade
  • I completely ACCEPT the risk or I am willing to let go of the trade
  • I act on my edges without reservation or hesitation
  • I pay myself as the market makes money available to me
  • I continually monitor my susceptibility for making errors
  • I understand the absolute necessity of these principles of consistent success and, therefor, I always follow them with confidence and joy.

What you’ll notice about his statements is that it is he is assuming that you have already done the first set of bullets up top; that you have already created a plan and you already have a set of RULES.  Now you might ask, how do I know if my set of rules now will work next month or next year? GREAT question. The market dates back all the way into the late 1700’s.  There is literally a few HUNDRED years of data.  That’s why I say that back testing is KEY.  Now that doesn’t mean that you need to back-test 200 years of data.  Not even close.  You want to back-test a reasonable time depending on your time-frame of trading.  For example, if I plan on trading based on a daily system, then I might back-test the last 5-6 years.  If I’m going to trade based on an intra-day 3 minute chart, I would probably backtest about a year.  There is no way to KNOW what is going to happen, but trading really boils down to probabilities.  Time and time again the same things tend to repeat themselves.  Why do you think the markets tend do to the same things over and over.  Why does it seem that certain stocks that are in the same class look the same from a chart perspective?  How come a company will report great quarterly results, but still go down? It’s because there is a greater number of traders that BELIEVE that this is where an equity is too much or too little.  Why do you think there are people who are talking about a “recession” right now?  Again, it’s because the same things seem to be occurring that did prior to a previous recession and people have that BELIEF.

So what does all this mean?  What can you gather from all this?  Well, a few things actually.  One is to make sure you create, find and organize a PLAN for trading.  Think about it as if you wanted to open up a company.  Do the research and find out how some of these traders got started and what they did.  Once you’ve done that, write down your plan and look at your questions from up top.  Once you can answer ALL of them, then you are moving toward being a consistently profitable trader.  Then take a look at what Mark Douglas wrote.  You have to own these statements mentally.  You have to truly believe that you are a consistent winner because of all of the statements above.

Remember, you are starting a business, and if you want your business to succeed, you need to have a PLAN!

“Plan your trade, and trade your plan” – Anonymous

A trader is the weakest link of any trading system

  
  Education
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So true. Tony Robbins also said “Success for anything is 80% of psychology and 20% of mechanics”. A trading system is mechanics of trading. If a trader has an absolutely winning trading system, but he/she has failed to execute it. This system is failure. For who can follow it consistently, it is a great system. So who is more important? It is the trader or the system?

Some people say it is hard to design a winning system. Or I don’t know how to do? Does it really true? Read what Richard Dennis said.

The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught. What they can’t do is give (people) the confidence to stick to those rules even when things are going bad.

Richard Dennis has also proved that trading is a skill not talent. Tony Robbins also said “Every skill is learnable”

 

Some examples of Overconfidence

  
  Education
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  • OverConfidenceA person who thinks his sense of direction is much better than it actually is. The person could show his overconfidence by going on a long trip without a map and refusing to ask for directions if he gets lost along the way. 
  • A person who thinks he is much smarter than he actually is. The person could show his overconfidence by not studying for his SATs, ending up with a lower score than he could otherwise have received. 
  • A person who thinks he has a photographic memory and a detailed understanding of a subject. The person could show his overconfidence by deciding not to study for a test that he has to take on the subject, thus doing poorly on the test due to lack of preparation. 
  • A person who thinks he is invaluable to his employer when almost anyone could actually do his job. The person might show his overconfidence by coming in late to work because he thinks he is never going to get fired, or by being overly demanding about getting a raise and threatening to quit if he doesn’t get his way. 
  • A person who thinks his spouse or partner will never ever leave because he or she loves him too much. The person might try to take advantage of the spouse or partner due to the overconfidence, thus driving the spouse away.  (more…)

Optimism & Pessimism

  
  Education
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Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.

Optimism can be a speculator’s enemy. It feels good and is dangerous for that reason. It produces a clouding of judgment. It can lead you into a venture with no exits. Even when there is an exit, optimism can persuade you not to use it.
You should never make a move if you are merely optimistic. Before committing your money to a venture, ask how you will save yourself if things go wrong. Once you have that worked out, you’ve got something better than optimism. You’ve got confidence.

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