Archives of “conviction” tag

rss

Six Positive Trading Behaviors

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

6-1) 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. (more…)

Six Questions Worth Asking at the End of the Trading Day

  
  Education
#  #  #  #  #  #  #  #  #

six2What opportunities did I miss and what could have alerted me to those opportunities?
* What kind of trades are making me money? Where am I losing my money? What can I do about that?
.
* When I took heat on trades, what could I have done to enter at better prices?
* Was the level of risk that I took in trades commensurate with my conviction in the trade ideas?
* What were the themes and markets driving prices today that I should be alert for tomorrow?
* What are the themes, economic reports, and markets that might drive prices overnight that I should be alert for in the morning?

Conviction, Anxiety and Belief

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

In 1952 Harry Markowitz effectively founded modern finance with his seminal paper “Portfolio Selection“. The famous (or infamous) CAPM and Efficient Markets Hypothesis, for all practical purposes, evolved from the Nobel winning ideas in this paper. (Note to self: resist urge to make Nobel joke). Ironically however virtually no one knows that Markowitz himself said his paper began with step 2! Step one was deciding what you believe.

We hear a lot from the well known trading coaches about conviction and it strikes me as funny because conventional risk wisdom says “don’t get married to an idea”, “let the market tell you”, “take what the market gives” and other such axioms all based on the idea of maintaining objectivity and essentially not becoming full of conviction.

Well which is it?

I mean we also hear “believe in yourself” but where do these advisories leave you when a trading idea is going wrong? How do you handle the teeter totter that holds belief and conviction on one side and price and risk management on the other? What fulcrum can you depend on?

We of course have our answer…but before we talk any more about it, we would REALLY like hear yours!

7 Points for Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #
  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. 

How many of these actions or beliefs apply to you?

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #
1You do not believe in yourself.If you do not think you can do it, how can you build the confidence you need to do battle with seasoned traders?
2You do not trust in your ability.If you do not have the proper education, how can you honestly think you can compete in the world’s largest playground, which is ruled by the two most powerful emotions: Fear and Greed. Lack of conviction manifests itself in many ways in this business (for example early exits or entries).
3You fail to treat trading as if it were a business.If you do not start thinking of this as a business and filling in your areas of weakness with solid reason and education, how can you achieve any level of success? You may hit a streak, but dumb luck runs out and then what?
4You fail to plan.Failure to define and achieve specific short-, medium- and long-term goals is a recipe for failure.
5You are just lazy.Your self-motivation and continued education are the lifeblood of your business. You must be eager to learn at all times regardless of past experiences or level of current knowledge.
6You fail to equip your business properly.You must have the proper tools. Do you think a doctor would perform surgery with a shank instead of a scalpel? How does a carpenter build without a saw or hammer? You get the idea. Use a reliable data and charting provider; get high-speed Internet access, and so forth.
7You fail to understand how to accept a loss.The markets do not know you. You do not exist to them in any other form than as the other side of a transaction. They do not care if it is your last dime, and your kids will not have shoes, and on, and on. We need losers to make money in this zero-minus-sum game, but taking an acceptable risk-reward ratio position and being wrong is not losing.
8You fail to control your emotions.Whether you win or lose, you should strive to remain at a comfortable emotional state while trading. Building the proper business plan for trading is enormously helpful in getting you to do just that.
9You fail to learn and execute the fundamentals of trading.Read, listen to CDs, attend seminars, read the Trade2win forums daily and practice your newfound knowledge. Everything you seek to know about trading has already been written or spoken about by successful traders. Try to learn something everyday.
10You cannot cope with change.There are three paradigms your mind should be a slave to: Patience, discipline and money management. The markets change everyday, and it is these three skills that allow us to be rigid and flexible at the same time in order to take consistent profits. Fight it and fail.
11You cannot follow rules.Losing traders often think that the rules of trading are made for others. Think that they are not for you? Think again. Fight them and you will have a very short trading career.
12You are too greedy.Thinking about trading profits instead of how you could better execute your plan is an obvious sign of greed.
13You fail to do what you know.Many people know what to do; yet very few people are able to do what they know. It is the rules of trading that force one to take action.
14You fail to understand that hard work makes luck.Some people think good traders are just lucky. Quite the contrary. They are studious, knowledge-seeking people who understand the paradigms they need to operate by. Take a close look at the traders you see as successful, and you will find years of education and hard work that created that “luck.” You can be just as “lucky.”
15You blame others when the full responsibility is yours.Accepting responsibility is the fulcrum point for succeeding in anything, especially trading. Doing something about it is the criterion. Execution is the reward, not the money. Money is the by-product of executing to plan. Do not blame the broker for a bad fill, when it was you who hesitated. This is just one example, but we are all aware of many others.
16Your lack of persistence.Be willing to take a stop loss at a particular price and time and just accept it without a fight. Be equally able to jump right back in at the same spot if the chart patterns and price action dictate that it is prudent. Or, even reverse your position if that is the prudent course to take. If your plan is drafted properly, you can be successful over time, but only if you are still around to be in business.
17You fail to follow the first law of learning.The first law of learning is repetition. Write it down and study it several times a day. Commit it to memory. Execute your plan.
18You fail to establish and maintain a positive attitude.This one is self-explanatory.
19Yes, that’s right; this is the 19th reason for failure: BTNA (Big Talk No Action).Many “traders” are not honest with themselves regarding the actual results of their trading; therefore, it is impossible to build the level of trust in themselves needed to act in the proper manner as situations arise. For example they put on a trade and then change their stop loss, or, even worse, they don’t place a stop order. This is a self-defeating cycle that is hard to break. However, if you are honest with yourself, you have a shot at improvement.

Trading quote

  
  Education
#  #  #  #  #  #  #  #  #

“The word ‘trading’ is not the way I think of things. I may be a trader in the sense that my frequency of transactions is relatively high, but the word ‘investing’ would apply just as much, if not more. In my mind, trading implies an anticipation of a sale at the time of purchase. Good trading is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake. The balance between confidence and humility is best learned through extensive experience and mistakes. There should always be respect for the person on the other side of the trade. Always ask yourself: Why does he want to sell? What does he know that I don’t? All great traders are seekers of truth. The markets are always changing, and the successful trader needs to adapt to these changes.”

Eleven Rules for Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies. (more…)

11 Trading Rules

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.

Rule #8
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.

Rule #9
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.

Rule #10
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.

Rule #11
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.

20 Habits of Wealthy Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1)      Patient with winners and impatient with losers
2)      Making money is more important than being right
3)      View Tech Analysis as a picture of where traders are lining up to buy and sell
4)      Before they enter every trade they will know profit target or stop exit
5)      Approach trade no.5 with the same conviction as the previous 4 losing trades
6)      Use naked charts
a)      As we mature we begin peeling off indicators
b)      Prices action is key
7)      Comfortable making decisions with incomplete information
8)      Stopped trying to pick tops & bottoms long ago
a)      They make their money in the meat/middle of a trend (wait for confirmation)
b)      A trend is much more likely to continue than it is to reverse
9)      Do not think of the market as expensive or cheap
a)      Ignore whether you think something is overpriced or understand, think price action
10)  Aggressive with trade size when doing well or modest when not
a)      Do more of what is making, less of what is not
11)  Realised that the market will be open tomorrow (more…)

Six Positive Trading Behaviors

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Number61) 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 (more…)

Go to top