Archives of “Day trading” tag

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Ten Questions to ask Yourself Before Every Trade

  
  Education
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If you are just randomly trading what you like with no real underlying system, method or planning then unfortunately your odds of success in the long term are slim. Trading a winning methodology is what creates an edge in trading.

Consistently trading a robust system or methodology enables you to trade in a way that historically wins, controls risk, and does not bring your ego and your emotions into your trading in a destructive way.

Ten questions to ask yourself before every trade:

  1. Does this trade fit my chosen trading style? Whether it is:  swing trading, momentum, break out, trend following, reversion to the mean, or day trading?
  2. How big of a position do I want to trade? How much capital am I going to risk? Am I limiting my risk to 1% or 2% of my trading capital?
  3. What is my risk of ruin based on my capital at risk?
  4. Why am I entering the trade here? What is the trigger to trade?
  5. How will I exit with a profit? A price target or trailing stop? (more…)

22 Trading Principles -By Paul Tudor Jones

  
  Education
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  1. It is possible to see that a market is dramatically overbought and prepare for, and then capture, huge gains after the sell off.
  2. Risk small amounts to make big profits.
  3. Bet against times when numerous leaders must agree.
  4. Long hours and a strong work ethic are keys to being a successful trader.
  5. While it is good to trade any market that will turn a profit, specializing in a market can lead to great success.
  6. The markets go down faster than they go up.
  7. If the market will not go down during bad news, it will likely go higher.
  8. The stock market moves in patterns and in cycles. Past price patterns repeat themselves due to human emotions.
  9. Many times traders think a big position order size means that a whale knows something, most times they do not. 
  10. It is okay to skip a trade if you can’t get your entry price.
  11. A momentum move does not just stop, it takes time to roll over.
  12. It is possible to trade successfully by gaming the actions of other traders.
  13. Be aggressive at high probability moments.
  14. Always stay in control of your trading and manage risk.
  15. Focus on risk management as the #1 priority in trading.
  16. Having the right mindset during a big loss that it is just temporary, is the key to coming back and being successful.
  17. Letting profits run is sometimes a great plan.
  18. Being long at all time highs in the indexes is a great strategy.
  19. Great money managers trade with passion.
  20. Even Market Wizards have doubts about winning when entering a trade. 
  21. When the top in a market is reached,  there is a lot of money to be  made shorting as panic selling sets in. 
  22. Guys from Tennessee can trade!

Psychology of Day Trading

  
  Education
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ReadingNewspaperRead today’s paper tomorrow. When you read yesterday’s paper each day with the
 knowledge of what the market already did, you will affirm that this mornings paper with  yesterday’s news has nothing to do with today’s market.

exitfromtradeYour decision to exit a trade means you perceive changing circumstances. Don’t suddenly  think you can pick a price, exit at the market.

judgement Remember the “power of a position.” Never make a market judgment when you have a  position.

legendary speculator Jesse Livermore

  
  Education
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legendary speculator Jesse Livermore on LETTING YOUR WINNERS RUN

(Chapter V) … “I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements – that is, not in reading the tape but in sizing up the entire market and its trend.”

In all of “Reminiscences” this crucial idea that the Really Big Money is always earned by prudently riding the large trends over time and not in day trading every minute fluctuation is one of the central themes of the book.

“be right and sit tight”

(Chapter V) … “And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.” (more…)

Are You Taking Trading Too Seriously?

  
Education, Video
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Here’s a great video about trading psychology, even though it’s not directly about the stock market, futures or Forex, and doesn’t reveal any day trading tips. But it does contain a secret most traders are violating every day.

Trading is a great business. I love it, I’m passionate about it, and it is so much fun that I’d do it even if there were no money involved.

But it’s not just me. We traders are a passionate bunch.

We spend a LOT of time reading, studying, trying different indicators, tweaking indicators, testing various strategies and looking at chart after chart after chart.

And then you add the money factor – and well, we can get to be a bit obsessive (just ask any trader’s spouse!).

Work ethic is good, and it does take a certain amount of experience in the markets to become successful. The problem arises when you take things TOO seriously. That causes a block of your mental and emotional energy. And in extreme cases, it can have negative consequences in the rest of your life.

This video isn’t about trading. It’s about life. And therefore, it is about trading.

Enjoy, and leave a comment below with your reaction to the video.



Trading Wisdom by – Jon Tait

  
  Education
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One of the most puzzling paradoxes of trading is that you have to show up every day, but most days your best move is to do nothing.

I don’t day trade, but I do look at a lot of time horizons, sometimes as short as 1 minute bars. But I’ve learned to focus my attention on shorter time horizons only when longer time horizons are at a critical juncture. My trading life became much simpler when just owning a stock was no longer a reason to look at a shorter time horizon than daily bars. I don’t even load up the quote streamer until I’ve made the decision to buy or sell a stock that day based on daily and weekly charts.

It can be more optimal to trade extremely short time horizons, but the benefits of trading very short term don’t scale linearly due to transaction costs becoming more difficult to beat. 

For me, it is important to not have to grind for every dollar. I don’t want a full time job from the markets, but I do want to make high returns on my money, so I consistently reform my trading to be in line with these goals.

I start off every campaign in a stock very fickle, weak handed. As a position works for me and I pyramid into a larger position, I become a strong hand; I’m dug in.

Quotes on Manipulation

  
  Education
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“Observation # 1: The greatest number of losing traders is found in the short-term and intraday ranks.  This has less to do with the time frame and more to do with the fact that many of these traders lack proper preparation and a well thought-out game plan.  By trading in the time frame most unforgiving of even minute error and most vulnerable to floor manipulation and general costs of trading, losses due to lack of knowledge and lack of preparedness are exponential.  These traders are often undercapitalized as well.  Winning traders often trade in mid-term to long-term time frames.  Often they carry greater initial levels of equity as well.” Walter Downs

“The ability of banks to issue claims far in excess of their reserve position is essentially regulated counterfeiting when those claims have little or no chance of being satisfied, and it is an inherently cyclical and destabilizing process. The Fed, as US banks’ chief regulator, has not only condoned this imprudent, unsustainable (and Constitutionally-dubious) activity, it has encouraged and abetted it.”  Paul Brodsky and Lee Quaintance

“He did not publish or spread any information that was false.  Instead he praised the companies he had invested in to the skies, including the spreading of rumors.  Does his action fall into information-based manipulation because of this?  The answer is: partly.  From the total gain of USD 800,000 he had to repay USD 285,000, so just over a third of the total gain.”  Mark Schindler   

“Runs occur when a group of traders create activity or rumors in order to drive the price of a security up.”  Unknown (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. 

 

Ten questions to ask yourself before every trade

  
  Education
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  1. Does this trade fit my chosen trading style? Whether it is:  swing trading, momentum, break out, trend following, reversion to the mean, or day trading?

  2. How big of a position do I want to trade? How much capital am I going to risk? Am I limiting my risk to 1% or 2% of my trading capital?
  3. What is my risk of ruin based on my capital at risk?
  4. Why am I entering the trade here? What is the trigger to trade?
  5. How will I exit with a profit? A price target or trailing stop?
  6. At what price will I know that I was wrong? Where is my stop loss based on the position size?
  7. Will I be able to admit I was wrong and exit the trade if my stop is hit, or will my ego make me hold and hope?
  8. Is the risk small enough that I can emotionally handle the loss without blaming the market?
  9. Can I really risk this money or do I need it for upcoming bills? Trade with risk capital not living expenses.
  10. Am I committed to staying disciplined and following my trading plan on the trade?

I believe the answers to these questions will determine your success in any trade more than anything else.

Wisdom from Market Wizards

  
  Education
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Tony Saliba

“How do you lose money? It is either bad day trading or a losing position. If it’s a bad position that is the problem, then you should just get out of it.”

“Clear thinking, ability to stay focused, and extreme discipline. Discipline is number one: Take a theory and stick with it. But you also have to be open-minded enough to switch tracks if you feel that your theory has been proven wrong. You have to be able to say, “My method worked for this type of market, but we are not in that type of market anymore.”

“Until recently, I set goals on a monetary level. First, I wanted to become a millionaire before I was thirty. I did it before I was twenty-five. Then I decided I wanted to make so much a year, and I did that. Originally, the goals were all numbers, but the numbers are’t so important anymore. Now, I want to do some things that are not only profitable, but will also be fun.”

Dr Van K. Tharp

“The composite profile of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behaviour and would be more likely to be a crowd follower. In addition, losing traders tend to be disorganized and impatient. Thet want action now. Most losing traders are not as bad as the composite profile suggest. They just have part of the losing profile.” (more…)

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