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Hallmark of a Position Day Trader

  
  Education
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hallmark-trader

  • Routine and Predictable daily methodology
  • Psychological Control: Discipline, Focus, Patience
  • Macro vs Micro Market Analysis … seeing the Big Picture
  • Comprehensive intraday Hit List analysis
  • Multiple intraday Set-up opportunities
  • Various chart pattern recognition … low risk opportunities
  • Capital preservation = risking less than 50% maximum stop loss.
  • Expectation & Time Exits: Scalp, Breakeven, Profit Target, Let Profits Run
  • Trading Execution Commitment: honoring Set-up signals, not P&L

    • Coach Yourself as a Trader

      
      Education
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    What are the three things (i.e. courses of action, strategies, resources) that you’ve found most helpful in mentoring/coaching yourself as a trader?

    coach

    And here is how I answered:

    • 1. Understand me. The most powerful tool I have found in life and in this specific case, the market, is what I, as a person, am capable of doing as a trader. I finally understand that personal characteristics that are engrained in my DNA will only allow me to trade successfully under specific circumstances. For example, I am much more consistent and profitable as a medium term and longer term trend trader than as a day trader (even more so on the long side). I don’t need to be everything, all the time as long as I continue to focus on the areas that bring me the greatest success. Understanding “me” has been my holy grail of understanding how to trade the market with some type of consistency and profitability.
    • 2. Learning to cut losses. It’s almost cliché but not many people can do it (in any aspect of life). I have learned to cut losses in my trading, my career, my hobby of competitive poker and everything else in life where the rule applies. Without this rule, there wouldn’t be a third rule. (more…)

    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.
    8. Do not listen to any unsolicited advice about the trade you are in, follow your own plan. Noise can really cause stress and mess up a trade, trade with emotional horse blinders on, keep out others voices and listen to your trading plan.
    9. Sit out markets that you are uncomfortable trading due to volatility or other looming risks. Know when it is time to trade and time to ‘go fishing’. This can save you a lot of emotional capital.
    10. Do your homework before you trade. Be confident in your trade until it hits your stop. Get out when your stop is hit, you already lost money don’t lose sleep as well.
    11. Keep your ego out of your trading, run it like a business.the P& L is your focus not your ego and not trying to prove anything to anyone else.
    12. Only trade when the odds are believed to be in your favor. It is much less stressful trading with the trend than against it.
    13. Do not blame yourself for losses if you followed all your rules. The market giveth and the market taketh away, just keep taking your entries and exits.
    14. If you do not know what to do, DO NOTHING.

    15. To lower stress levels trade less and get away from watching every single price change. Day traders could trade only the open and closing hour, swing trader and trend traders could just take opening or closing signals. You could go from every tick to just checking in every hour or so if you have options or hard stops in. Most of the days trading is random noise, and randomness will stress you out focus on your time frame and only the quotes that really manner when they manner. 

     

    Traders’ Discipline

      
      Education
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    disciplinetraderTop daytraders have the discipline to follow their daytrading system rigorously, because they know that only the trades that are signaled by their system have a greater rate of success. Matching a method of trading with your personality is the only way you will ever feel comfortable in the markets. Some websites have sought to profit from day traders by offering them hot tips and stock picks for a fee.

    Day trading is an investment tactic with a relatively short investment. You need to position yourself so that you can endure long strings of losses, and maintain your day trading system. (more…)

    Coach Yourself as a Trader

      
      Education
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    What are the three things (i.e. courses of action, strategies, resources) that you’ve found most helpful in mentoring/coaching yourself as a trader?

    And here is how I answered:

    • 1. Understand me. The most powerful tool I have found in life and in this specific case, the market, is what I, as a person, am capable of doing as a trader. I finally understand that personal characteristics that are engrained in my DNA will only allow me to trade successfully under specific circumstances. For example, I am much more consistent and profitable as a medium term and longer term trend trader than as a day trader (even more so on the long side). I don’t need to be everything, all the time as long as I continue to focus on the areas that bring me the greatest success. Understanding “me” has been my holy grail of understanding how to trade the market with some type of consistency and profitability.
    • 2. Learning to cut losses. It’s almost cliché but not many people can do it (in any aspect of life). I have learned to cut losses in my trading, my career, my hobby of competitive poker and everything else in life where the rule applies. Without this rule, there wouldn’t be a third rule.
    • 3. Study and work hard. Sounds so simple but we live in a very lazy society. It is extremely important to my success for me to continuously study the markets on a fundamental and technical level and learn from my successes and mistakes. If you think about it, we would all start at square one on every trade if we didn’t learn from past situations where we succeeded or failed. Applying the knowledge gained from past experiences allows me to properly analyze similar situations in the future with slightly greater odds of success (or at least I would like to think). Never stop learning is a phrase that I will never stop saying as it proves to be truer the older I get.

    15 Trading Rules For Day Traders

      
      Education
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    Trading rule No 1. Never chase. Forget about the Rupee loss for a moment as the real damage comes from the distraction it creates.

    Trading rule No 2. Wait for the break. Most traders buy inside the range, get impatient and as a result they sell on first sign of strength which ends up being the breakout.

    Trading rule No 3. Don’t ride the ticks and Rupee profits. It creates emotional turmoil and is draining. Prevention is best cure. Takes the fun out of the game.

    Trading rule No 4. Price action trumps everything. Management lie or mislead but price action (money flow) never lies.

    Trading rule No 5. Sell the news or a least sell partials. Markets discount everything and over the long run you will be better off.

    Trading rule No 6. Always stay in control. Do NOT put yourself in news related coin toss trades, where the risk cannot be managed.

    Trading rule No 7. Mind your own business, avoid conflict. If you take offence because someone has disagreed with your trade, then you are such a precious little petal.

    Trading rule No 8. Do NOT set targets as all this creates is a premature EXIT. Run a trailer and let that take you out.

    Trading rule No 9. Minimise whipsaw at all costs. It’s a trader killer. The root cause of trading failure more often than not, starts with whipsaw.

    Trading rule No 10. Do NOT buy stretched breakouts. More often than not they recoil back into the range to flush traders out.

    Trading rule No 11. Start will longterm charts and look to catch major breaks/moves. These tend to follow through and it makes it easier to run with winners.

    Trading rule No 12.  Turn trading rules into habit. There is no point in having trading rules if you dont apply them!

    Trading rule No 13. And the most important; only tell your wife about your losers. 🙂

    Trading rule No 14. Hit those stops, no questions asked. Hitting your stop and watching a stock rally hurts but not htting your stop and watching the stock fall hurts a hell of alot more.

    Trading rule No 15. Avoid Blue Channels during trading hrs.Never Trade on TV Flashes ,Don’t trade on Result day -Untill u are having sure Result with u.Don’t trade on  Data flashes about Options -Everything is leaked and known by few Top people 

    The Only Way to Day Trade

      
      Education
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    There are four cardinal principles which should be part of every trading strategy. They are: 1) Trade with the trend, 2) Cut losses short, 3) Let profits run, and 4) Manage risk. You should make sure your strategy includes each of these requirements for success.

    Trade with the trend relates to the decision of how to initiate trades. It means you should always trade in the direction of recent price movement.

    Mathematical analysis of commodity price data has shown that these price changes are primarily random with a small trend component. This scientific fact is extremely important to those desiring to pursue commodity trading in a rational, scientific manner. It means that any attempt to trade short-term patterns and methods not based on trend are doomed to failure. It also explains why day trading is darned difficult and why almost no day trader is a long-term success.

    The shorter the time frame in which you examine price action, the smaller the trend component is. Commodity price action is fractal. That means that as you shorten or lengthen the time frame, price action remains similar in behavior. Thus, five-minute charts have roughly the same appearance as hourly charts, daily charts, weekly charts and monthly charts.

    This similarity in chart appearance convinces traders that you can day trade successfully with the same tools you use on longer-term charts. Of course, they try to use much of the arsenal of technical analysis that doesn’t work on long-term charts either. Things like Oscillators, Candlesticks and Fibonacci numbers.

    However, even trend-following tools that work in intermediate to long-term time frames won’t work in day trading. This is because the trend component is so very small in short-term data that you must use a highly effective method to overcome the costs of trading.

    In longer-term trading, you can let your profits run. You do it by definition or it wouldn’t be long-term trading. In day trading you can only let your profits run to the end of the day. This means your average trade (the average profit of both your winning and losing trades) must necessarily be much smaller than if you could let your profits run for days, weeks or months. However, your costs of trading–slippage, commissions, the bid/asked spread and mistakes–stay roughly the same on a per trade basis. Thus, your day trading system must be much more consistent and robust to stay ahead of the costs of trading than would an intermediate to long-term system. There are few day trading approaches that meet this test.

    Since market price action is mostly random, successful trading methods must somehow exploit a non-random feature of market price action. The tendency of most markets to trend is the only possible edge in trading, so a winning approach must harness trend in some way. Tradeable trends do not show up often in the very short term. They certainly are not present every day. That is why the person who tries to day trade at least once every day, and perhaps even more often, is doomed to failure. The more often you day trade, the more likely it is that you will be a long-term loser. (more…)

    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.
      1. 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.

    Are You Doing These 7 Mistakes ?

      
      Education
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    *  You’re a momentum trader and you’re trading a slow, low volatility market;
    *  You’re a trend trader and you’re trading a choppy, range market;
    *  You’re a research-oriented big picture trader and you’re getting caught up in short-term price action;
    *  You’re a skilled short-term trader and you’re locked in a longer-term directional market view;
    *  You’re a contrarian fader and you’re getting run over in high volume directional flows;
    *  You’re an independent thinker, but you’re distracted and influenced by the views of others;
    *  You’re a trader who reads others well at the table, but you’re isolated from other traders;
    A great way to lose money is to not understand yourself and how you’re wired cognitively.  If you’re a deep thinker, you’ll lose money sitting at the trading table.  If you’re a fast thinker, you’ll lose money dabbling with investment theses.  The route to success is to be who you are when you’re functioning at your best.  Working on improving your discipline, controlling your emotions, and following your process is not helpful if you’re sitting at the wrong table to begin with.
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