Archives of “day trader” tag

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Seven Concepts

  
  Education
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If you are serious about your trading there are some concepts you must know in significant details. Those concepts will help you build a strong foundation on which you can build a trading system. There are seven  concepts you should study:
 

  • Momentum : If you understand this you will understand trends and mean reversion. You will understand why and how momentum works in the market. Most indicators are momentum based. Trend following and buying strength also works, so does mean reversion. They are all part of the momentum phenomenon. 
  • Market Breadth: Stock markets are composite markets. The overall move in market is an aggregate of moves of several hundred or several thousand stocks. So the level of participation in a move is important. 
  • Equity Selection: Because the overall market is a composite of many individual moves, it becomes critical to select right kind of stocks from the universe of stocks. Hence equity selection is extremely critical. You should know various ways in which one can select equities.
  • Market Anomalies: Market anomalies are the distortions in the market. If you base your trading on a proven and statistically significant anomaly, you will be profitable. Absent that no amount of indicators will help you. A through understanding of anomalies will give you an edge.
  • Market Microstructure: Market Microstructure is a branch of finance concerned with the details of how exchange occurs in markets.  Understanding this will tell you how the market operates. The concept of market microstructre is very critical if you are trading very small time frames or are a day trader. Because to be successful on those time frame you need to find exploitable anomalies in market microstructure. You need to understand role played by market makers, automated programs, arbitragers, large fund buyers and so on. Their tactics and behaviour creates certain patterns 
  • Growth investing : Growth investors buy stocks of companies growing faster than the average company in the market. 
  • Value investing : Value investors buy stocks of companies which are cheap or out of favor.

 

7 Basic Truths of Trading

  
  Education
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  1. Well-defined objectives. Are you trying to beat a certain return hurdle, like inflation or an index? Are you trying to generate 5% or 50% returns per year? You have to understand what you are trying to do and then bend your investment process around it. The other way around isn’t possible.
  2. An understanding of the markets that you will be operating in. Stick to what you know. Narrow your focus so as to make the most of your efforts. You need to know everything about the markets where you’re taking positions.
  3.  A clearly defined methodology for getting into and out of positions. This includes which indicators, news items, fundamental data points you look at and when you take action. This is your checklist—you should have it so well defined that you can be sure of the exact steps along the way. You need a game plan so that you stay consistent and disciplined and don’t get flustered under pressure. It should become automatic and engrained.
  4. This methodology must utilize your strengths and skills and suit your personality. A cerebral, research-driven economist should put that to work, instead of becoming a swing trader based on technical analysis. An adrenaline-fueled athlete should be an intraday trader, not be a long-term trend follower. Remember, every successful trader has a methodology of their own which plays to their strengths and their personality.
  5. This methodology has a positive statistical expectancy– the gains from winners more than outweigh the losses on losing trades. Use your own statistics and the Kelly Formula for a rough guide as to whether or not you have positive statistical expectancy.  On average you want to expect to win on an individual trade, meaning that your expected wins outweigh your prospective losses. That doesn’t guarantee that you will actually profit on each trade, it just means that over a sufficiently large quantity of trades, you will come out ahead.
  6. A well-stated risk management policy for when you get out of losing positions and how you manage risk overall. Cut losers. Let winners ride.  Many people have tried to overthink this rule and ended up losing as a result. Furthermore, you never want to put yourself in a position where you can blow up, so you need to be thinking how you can avoid taking excessive risk in the first place. Just remember Warren Buffett’s Two Rules:A framework for sizing positions. This is related to risk management— obviously, you don’t want to take a position that’s over a certain size, ever. But you may also want to size positions according to certain specific critieria, such as your conviction in the position or volatility in the market. Or they could all be the same size. Nonetheless, your methodology has to be able to address it and come up with a well-reasoned answer.
    1. Never Lose Money.
    2. Never Forget Rule #1.

7 concepts that can make you a better trader

  
  Education
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  • Momentum : If you understand this you will understand trends and mean reversion. You will understand why and how momentum works in the market. Most indicators are momentum based. Trend following and buying strength also works, so does mean reversion. They are all part of the momentum phenomenon. 
  • Market Breadth: Stock markets are composite markets. The overall move in market is an aggregate of moves of several hundred or several thousand stocks. So the level of participation in a move is important. 
  • Equity Selection: Because the overall market is a composite of many individual moves, it becomes critical to select right kind of stocks from the universe of stocks. Hence equity selection is extremely critical. You should know various ways in which one can select equities.
  • Market Anomalies: Market anomalies are the distortions in the market. If you base your trading on a proven and statistically significant anomaly, you will be profitable. Absent that no amount of indicators will help you. A through understanding of anomalies will give you an edge.
  • Market Microstructure: Market Microstructure is a branch of finance concerned with the details of how exchange occurs in markets.  Understanding this will tell you how the market operates. The concept of market microstructre is very critical if you are trading very small time frames or are a day trader. Because to be successful on those time frame you need to find exploitable anomalies in market microstructure. You need to understand role played by market makers, automated programs, arbitragers, large fund buyers and so on. Their tactics and behaviour creates certain patterns 
  • Growth investing : Growth investors buy stocks of companies growing faster than the average company in the market. 
  • Value investing : Value investors buy stocks of companies which are cheap or out of favor.

15 Ways to Manage Trader Stress

  
  Education
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  1. Only risk 1% of total trading capital per trade with stop losses and proper position sizing. Proper positions sizing makes the emotional impact of any one trade only one of the next one hundred a totally different mental perspective than an all in/have to be right Hail Mary trade.

  2. Only trade a  position size you are comfortable with.
  3. Trade a method or system you believe in based on back testing of a positive expectancy.
  4. Know where you will get out of a trade before you get in.
  5. Only trade with a detailed trading plan.
  6. Believe in your ability to follow your trading plan. YOu must have faith in yourself to lower your stress levels.
  7. Know yourself as a trader and only take your kind of trades. Take trades that will leave no regrets because they were good trades regardless of out comes. (more…)

Emotional Resilience & Creativity -Qualities of Successful Traders

  
  Education
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Emotional Resilience – The very successful traders have a great attitude about losing. They know it’s going to happen. They don’t take it personally. If anything, they try to find learning experiences from losses. Elsewhere I have written about how good traders view a losing trade as “paying for information”. A trade with an edge that doesn’t go their way either tells them something important about the market, or it tells them something about their execution. Either way, it’s a potential learning experience. Resilience means that the excellent traders trade well out of a hole. They can be down money for day, week, or quarter and continue to make the same good trades they would normally make. 
Creativity – We normally think of creativity as a trait that belongs to artists, but it also is quite noticeable among traders who have been successful over many years. They find edges in the most unlikely places. They look at interesting relationships within the market they’re trading, and they find unique relationships from one market to another. One trader very recently told me of a strategy that exploited the way one market was priced related to a similar market at certain time periods. I would have never thought of that idea in a million years. He was making consistent money from the concept.

How to Develop Yourself as a Trader -Anirudh Sethi

  
Analysis, Education
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There is a well-known axiom in business: “Neglect to plan and you intend to fall flat.” It might sound chatty, yet the individuals who are not kidding about being fruitful, including traders, ought to take after these eight words as though they were composed of stone. Ask any trader who profits on a reliable premise and they will let you know, “You have two options: you can either efficiently take after a composed arrangement, or come up short.” Mastering the specialty of Forex trading is not as basic as it appears. Each and every day the number of retail traders in the internet trading group is expanding at an exponential rate because of its outrageous level of benefit potential. The master traders at Saxo have secured their money related opportunity in life just by trading the live resources in the market. Be that as it may, keeping in mind the end goal to profit in the internet trading world, you have to know how to deal with your Forex trading account available. Not at all like the expert traders, the tenderfoot traders in the monetary business bounce into the web based trading world without thinking about the market subtle elements and in this way they lose an immense measure of money. In this article, we will examine how to wind up noticeably an expert trader in the Forex trading world. On the off chance that you have a composed trading or venture design, congrats! You are in the minority. While it is still no undeniable certainty of achievement, you have disposed of one noteworthy barricade. On the off chance that your arrangement utilizes imperfect procedures or needs planning, your prosperity won’t come promptly, however at any rate you are in a position to diagram and adjust your course. By archiving the procedure, you realize what works and how to abstain from rehashing expensive slip-ups.

Acknowledging Direct Resources for Profit

In order to develop yourself as an expert Forex trader, you have to consider trading as your business. On the off chance that you take a gander at the expert traders in the money market then you will see that each and every one of them is trading the live resources in their Forex trading account with an extraordinary level. Much the same as the expert specialist the master in the monetary business likewise has a strong trading plan to trade the live resources in the market. A large portion of the fledgling traders in the budgetary market consider trading as a get rich speedy plan and at last, loses money in the internet trading world. So on the off chance that you genuinely need to wind up plainly an expert trader at that point ensure that you build up a trader’s attitude and consider trading as your business. Trading is a business, so you need to regard it in that capacity on the off chance that you need to succeed. Perusing a few books, purchasing an outlining program, opening an investment fund and beginning to trade is not a strategy for success – it is a formula for calamity. Once a trader knows where the market can possibly respite or invert, they should then figure out which one it will be and act as needs are. An arrangement ought to be composed of stone while you are trading, yet subject to re-assessment once the market has shut. It changes with economic situations and modifies as the trader’s aptitude level moves forward. Every trader ought to compose their own arrangement, considering individual trading styles and objectives. Utilizing another person’s arrangement does not mirror your trading qualities. Such a large amount of the reason numerous traders fall flat is that they never seek after trading the correct route, as an execution teach. They don’t have an organized procedure of learning. They don’t have the instruments to legitimately replay, audit, and right there trading. They don’t have guides to good example great trading rehearses. They don’t learn methodologies with genuine edges and rather trade arbitrary examples on outlines or features existing apart from everything else. They don’t have enough funding to survive their expectations to absorb information. They don’t discover the trading markets and styles that best fit their specific qualities.

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Discipline

  
  Education
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A day trader should leave no room for fear and greed to take over, otherwise, this will be the key to your losses. A good trader should be disciplined, make discipline a habit, and act in accord with trading systems/strategies. You can do your trade in a consistent and reliable manner this way. Certain situations require an individual to make decisions based on their pre-set criteria and parameters.

 You should make it a point to habitually follow your trading system/plan. When you’re making trading decisions, don’t let your emotions rule you. A day trader should always be disciplined, and once you attain your objective, leave the market first. Oftentimes people plunge in deeper because they are influenced by greed and fear.

 There are also day traders who are quite reluctant to lose money. For instance your stock goes down,and you’re still hoping that after some time it will rise again. And to your surprise, the share price goes further down. If only you were not reluctant to lose money, you could have sold it the first time its price went down, and prevent further loss.

 Day traders need to make fast executions and confirmations of the trade, so you must have a fast internet connection. They also need to receive and deliver quotes, news, and other pertinent market data. A fast internet connection allows you to make your day trading in a timely fashion. If you’re serious with your day trading. You would need hardware and software requirements to put a sufficient platform at home for online trading.

 You can practice through simulated trading before using real money. Here you can incorporate all your trading techniques and see if they actually work. Don’t be a scared to lose a certain amount of money. But it doesn’t mean that you should not limit your losses. Most importantly, you should learn from your past losses. Becoming a day trader is a simple thing. But in any case it requires dedication, time and effort. You will reap profits that you’ve never imagined, if you are able to put all of these things together.

15 Crucial Points From -Trading Psychology 2.0

  
  Education
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11. Discipline, while necessary for success, is never sufficient. Discipline does not substitute for skill, talent, and insight. Strict, disciplined adherence to mediocre plans can only lock in mediocre results. If it were otherwise, there would be no losing automated trading systems.

2. It is not enough to find an “edge” in financial markets; as any tech entrepreneur can attest, competitive advantages are perishable commodities. Those who sustain success continually renew themselves, uncovering fresh sources of competitive advantage. That requires processes for assessing and challenging our most basic assumptions and practices. It takes a good trader to create success, a great one to recreate it. Nothing is quite as difficult— and rewarding— as letting go of what once worked, returning to the humble status of student, and arising phoenix-like from performance ashes.

3. This productivity is readily apparent on a day-to-day, week-to-week basis: The greats simply get more done than their colleagues. They organize their time and prioritize their activities so that they are both efficient (get a lot done per unit of time) and effective (get the right things done). How much time do we typically waste as traders, staring unthinkingly at screens, chatting with people who offer little insight, and reading low-priority/ information-poor emails and reports? The successful traders invariably are workhorses, not showhorses: They get their hands dirty rooting through data and make active use of well-cultivated information networks.

4. Successful traders I’ve known work as hard on themselves as on markets. They develop routines for keeping themselves in ideal states for making trading decisions, often by optimizing their lives outside of markets.

5. This, for me as a psychologist, has been one of the greatest surprises working with professional money managers: The majority of traders fail, not because they lack needed psychological resources but because they cannot adapt to what Victor Niederhoffer refers to as “ever-changing cycles.” Their frustration is a result of their rigid trading, not the primary cause. No psychological exercises, in and of themselves, will turn business around for the big-box retailer that fails to adapt to online shopping or the gaming company that ignores virtual reality. The discipline of sticking to one’s knitting is destined for failure if it is not accompanied by equally rigorous processes that ensure adaptive change. (more…)

DISCIPLINE IN TRADING

  
  Education
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Discipline: “Habit of Obedience”

 Have a trading plan or system is essential to the exercise of good discipline, as it normally imposes certain parameters and sets out certain criteria which dictate how trading decisions should me made and what needs to be done in certain situations. Habitually following your plan is what is meant by the exercise of good trading discipline, which, in turn, will help you realize the best expected results possible from your plan. If you find that your trading plan or system is not meeting your expectations, despite habitually following it for a reasonable period of time, good discipline requires that you be prepared to review it and make any adjustments or fine tuning necessary for future use.

 Lack of Discipline

Day traders who suffer from lack of discipline often allow their emotions to rule their trading decisions, which often leads to bad decisions and unacceptable trading losses. Never allow your emotions to rule your trading. In order to trade successfully, you must develop a trading plan. (more…)

1 Thing Critical To A Trader's Success

  
  Education
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I think more than anything it has to be discipline. Because as important as finding a suitable methodology, developing a strategy, sound risk management, and position sizing is, it will be for nothing if you don’t have the discipline to consistently execute it and follow your rules.

Discipline is an integral part of all trading, whether systematic or discretionary, day trading or buy-and-hold, across all asset classes. I don’t believe you can be consistently successful without it.

Risk control based on risk per trade, risk control based on sector, risk control based on total portfolio.

You must know how much you can lose on a given trade, and the maximum loss to your entire portfolio at any one time. Only then can you take the necessary measures to manage these risks.

Almost equally important is correct trading psychology. Being able to accept trades that do not work. Staying focused and strong in the complete uncertainty of trading.

Because even the best trading system will have losing periods and this is when you need to remain discipline and continue executing your trades.

A trader must have many different ingredients to be successful in trading, but what is absolutely critical is that you must love the type of trading you do.

Many people think they have a passion for trading but the reality of trading; watching charts, managing risk all day, is not as exciting as many believe. If you are a day trader then you must actively enjoy this process.

If not, you must find another form of trading (or profession) that suits your style. That might be swing trading, automated trading, systems trading, whatever. But what you must have is passion!

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