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Trading Wisdom

  
  Education
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The stock market, just like life, can change on a dime.  In the market, just as in life, we must learn to adapt to change.  What separates the great trader from the rest of the crowd is his or her ability to change based on current market conditions.  In other words, NO EGO ALLOWED.  Mark Douglas, in his first book entitled The Disciplined Trader writes,

“There must be a difference between these two types of traders-the small majority of winners and the vast majority of losers who want to know what the winners know. The difference is that the traders who can make money consistently on a weekly, monthly, and yearly basis approach trading from the perspective of a mental discipline.  When asked for their secrets of success, they categorically state that they didn’t achieve any measure of consistency in accumulating wealth from trading until they learned self-discipline, emotional control, and the ability to change their minds to flow with the markets.”

We trade the current market conditions as they unfold with a plan to trade one way or the other.  To do otherwise would be to fight an undefeated foe.

Why traders wins & loses

  
  Education
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WIN-LOSE

Why traders wins

1. Develop specific procedures.
2. Have a defined operational methodology.
3. Understand how your trading system works.
4. Be sufficiently capitalized.
5. Don’t take quick profits.
6. Begin using a system after it draws down.
7. Be willing to accept consecutive losses.
8. Don’t think too much.
9. Don’t set specific price target.
10. Don’t believe the tight stop loss myth.
11. Play your own game-avoid the news.

Why traders loses

1. Lack of defined methodology.
2. Poor self control and discipline.
3. Information overload.
4. Riding losses.
5. Taking profit quickly.
6. Poor understanding of system basics.
7. Lack of consistency.
8. Too emotional and suggestible.
9. Too close the makes.
10. Can’t accept more than a few consecutive losses.

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.

10 Essential Trading Words

  
  Education
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1. Simplicity – have a simple, well defined way to generate trading ideas. Have a simple approach towards the market. You can’t take everything into account when you try to make an educated decision. Filter the noise and focus on several key market components. For me, they are relative strength and earnings’ growth.
2. Common sense – create a trading system that is designed on the basis of proven trading anomaly. For example, trend following in different time frames.
3. Flexibility – be open to opportunities in both directions of the market. Be ready to get long and short.
4. Selectivity – chose only trades with the best risk/reward ratio; stocks with the best set ups; it doesn’t make sense to risk a dollar to make a dollar.
5. Don’t overtrade – two or three well planned trades in a week (month) might be more than enough to achieve your income goals. Patiently wait fot the right set up to form and to offer good risk/reward ratio.
6. Exit strategy – Always, absolutelly always have an exit strategy before you initiate a trade. Know at which point the market is telling you that you are wrong and do not hesitate to cut your losses short immediatelly. Don’t be afraid or ashamed to take a trading loss. Everyone has them. Just make sure that you keep their size to a minimum.
7. Let’s profits run – one or two good trades might make your month. One or two good months might make your year. Letting profits run is as important as cutting losses short. Bigger winners will allow you the luxury to be right in less than half of the trades and still be profitable.
8. Consistency – Stick to your method of trading ideas’ generation.
9. Specialize – Specialize in one or two distinct setups. It could be a combination of technicals and fundamentals, certain timeframe or special event as a trading catalyst, certain sector or trading vehicle.
10. Have a plan – Which are the stocks that you will be paying special attention to – this week, today. Why those stocks? In which direction you expect them to continue their move? What will give you a clue for the beginning of the move? Follow them exclusivelly and enter without a hesitation when they give you a signal. Don’t just wake up and sit in front of your monitor without having a clue what you are going to trade today.

7 Points for Traders

  
  Education
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  1. You don’t choose the stock market; it chooses you.  A little bit of early trading success can have a profound effect on a person’s soul.  If it does choose you, you’ll have to accept that your life and investing will become forever connected.7numbers
  2. Your methodology must provide an unshakeable foundation that you believe in totally, and you must have the conviction to trade based upon it.   If your belief is tentative or if you don’t have complete faith in your methodology, then a few bad trades will destabilize and erode your confidence. 
  3. A calm mindset that can focus on the execution and not on the outcome is what produces profits.  It takes total emotional control.  You must maintain your balance, rhythm and patience.  You need all three to stay in the game.
  4. The markets are always conniving with ingenious techniques to get you to lose your patience, to get you frustrated or mad, to bait you to do the wrong thing when you know you shouldn’t.  A champion doesn’t allow the markets to get under his skin and take him out of his game.
  5. Like a great painting, all good trades start with a blank canvas.  Winning traders first paint the trade in their mind’s eye so that their emotional selves can reproduce it accurately with clarity and consistency, void of emotions as they play it out in the markets.
  6. The “here and now” is all that matters.  You can’t think about the last trade or the last shot or worry about the future.  You need to put on your “amnesia hat” in order to remain completely unfazed by what came before.  Only by doing so can you be totally absorbed in executing your present trade.
  7. Being prepared and having put in the work results in the bringing together of your intuition and confidence.  The two go hand in hand.  Extraordinary results can be expected when you are able to see it, feel it and trust it. 

Trading Quote

  
  Education
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“The ability to change one’s mind is probably a key characteristic of successful traders. Dogmatic and rigid personalities rarely succeed in markets. The markets are a dynamic process and sustained trading success requires the ability to modify and even change strategies as markets evolve. Successful traders have the ability to adapt to the changing dynamics of the market and in the process maintain their consistency of performance.”

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”

 

Paul Tudor Jones – 60 Minutes Interview

  
Education, Video
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Jones is considered one of the best traders in the business for one main reason: CONSISTENCY!He has produced positive returns for 25 straight years! I don’t know the exact number of years, but you get my point. The fuel behind his consistency is his discipline, specifically his ability to manage risk and cut losses.

Besides his tremendous success as a trader and a hedge fund manager, what makes Jones an even bigger hero in my view is his philanthropy. I love the phrase “The secret to living is giving” and Jones truly exemplifies this quote. In other words, what’s the point of being successful if you never give back to others? As Jones says in this 60 Minutes interview: “You find your joy in life through service and sacrifice.” Enjoy the video!

 

Consistency

  
  Education
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consistency
Consistency, consistency, this is one of the most important quality I wanna achieve. Here I have a set of goals pertaining to consistency. I got the material from an article sometimes ago. I have no idea who is the author. Anyway, here is the abstract and I have added my own ideas.
I want to consistently..

  • Visualize myself in tune with the market
  • consistency1
  • consistency2
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