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100 TRADING TIPS

  
  Education
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experience2

1)Nobody is bigger than the market.

 2)The challenge is not to be the market, but to read the market. Riding the  wave is much more rewarding than being hit by it.
 
 3)Trade with the trends, rather than trying to pick tops and bottoms. 
    
 4)There are at least three types of markets: up trending, range bound, and  down. Have different trading strategies for each.
 
 5)In uptrends, buy the dips ;in downtrends, sell bounces. 
    
 6)In a Bull market, never sell a dull market, in Bear market, never buy a dull  market. 

    7)Up market and down market patterns are ALWAYS present, merely one is  more dominant. In an up market, for example, it is very easy to take sell  signal after sell signal, only to be stopped out time and again. Select trades  with the trend. 
  
 
 8)A buy signal that fails is a sell signal. A sell signal that fails is a buy signal. 
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Livermore on speculation

  
  Education
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Just remember, without a discipline, a clear strategy and a concise plan, the speculator will fall into all the emotional pitfalls of the market and jump from one stock to another, hold a losing position too long, cut-out of a winner too soon and for no reason other than fear of losing the profit. Greed, fear, impatience, ignorance and hope, will all fight for mental dominance over the speculator. Then after a few failures and catastrophes, the speculator may become demoralized, depressed, despondent, and abondon the market and the chance to make a fortune of what the market has to offer.

Develop your own strategy, discipline and approach to the market. I offer my suggestions as one, who has traveled the road before you. Perhaps I can act as a guide for you and save from falling in some of the pitfalls that befell me. But in the end the decisions must be your own”.

9 Wisdom Quotes from George Soros

  
  Education
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George Soros doesn’t need an introduction. He is a living trading legend. Here are some of the smartest things he has ever said about markets. His thoughts are in brown.

1. Perceptions affect prices and prices affect perceptionsGeorge-Soros-gold

I believe that market prices are always wrong in the sense that they present a biased view of the future. But distortion works in both directions: not only do market participants operate with a bias, but their bias can also influence the course of events.

For instance, the stock market is generally believed to anticipate recessions, it would be more correct to say that it can help to precipitate them. Thus I replace the assertion that markets are always right with two others: I) Markets are always biased in one direction or another; II) Markets can influence the events that they anticipate.

As long as the bias is self-reinforcing, expectations rise even faster than stock prices.
Nowhere is the role of expectations more clearly visible than in financial markets. Buy and sell decisions are based on expectations about future prices, and future prices, in turn are contingent on present buy and sell decisions.

2. On Reflexivity

Fundamental analysis seeks to establish how underlying values are reflected in stock prices, whereas the theory of reflexivity shows how stock prices can influence underlying values. One provides a static picture, the other a dynamic one.

Sometimes prices change before fundamentals change. Sometimes fundamentals change before prices change. Price is what pays and until expectations change, prices don’t change. What causes expectations to change? – it could be change in fundamentals or change in prices. So what I am saying is that sometimes prices could be manipulated to change expectations, which will fuel further price momentum in a self-reinforcing way.

3. “Once a trend is established it tends to persist and to run its full course.” – Sentiment changes slowly in trending markets (up or down) and extremely fast in choppy, range-bound markets.

4. “When a long-term trend loses it’s momentum, short-term volatility tends to rise. It is easy to see why that should be so: the trend-following crowd is disoriented.” (more…)

48 Trading Laws

  
  Education
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1. Never outshine the master. (You can trade better than your mentor, just don’t expect him to like it. You’ll also learn more from people who you help, than from those who you work against.)

2. Never put too much trust in friends. Learn how to use enemies. (The only one you can trust as a trader is yourself and your own decisions. When the herd is against your positions, find something that is misunderstood, overlooked, or not fully recognized in the current stock price.)

3. Conceal your intentions. (Limit orders are good for the novice and undisciplined, but the market makers will never let you pick off the bottoms and tops using these.)

4. Always say less than necessary. (Talk is cheap and being concise is a good thing. It’s ok to keep some things you learn and strategies you create all to yourself.)

5. So much depends on reputation – guard it with your life. (Wall Street watches where the smart money is going at all times and herd-like patterns typically follow. Find those with the best reputation and figure out what they’re doing now. It will help unlock some secrets to their success.)

6. Court attention at all cost. (The key is to be ahead of the tape before Wall Street takes notice. Find stocks that few are looking at which offer tremendous growth prospects. They’ll be tomorrow’s winners, not the stocks you hear so much about right now.)

7. Get others to do the work for you, but always take the credit.(It’s ok to use others’ research and opinions, but realize that none of these can serve as a substitution for common sense and developing your own edge in the market. What is already known and published by others has already been acted upon no matter what you may think or have been told. Assume you’re always the last to know.)

8. Make other people come to you – use bait if necessary.(Success breeds popularity. If others think that they can learn or profit from you, you’ll never be lonely. However, with respect also comes responsibility to act in the best interests of others, many times before your own.)

9. Win through your actions, never through argument. (Don’t waste time convincing others on message boards how good or bad a stock is and/or telling people how smart you were because of good calls you’ve made in the past. Instead, trade the stock and make your profit. Talk will never pay your bills. Show others by demonstration, not by time wasting chatter.)

10. Infection: avoid the unhappy and unlucky. (This is right on the money. I couldn’t have said this better myself. Who you surround yourself with will ultimately determine your destiny. Marry for love, choose your friends carefully, and spend time with people who’ve been more successful and who are much smarter than you. Good and bad emotional states are as infectious as a disease.)

11. Learn to keep people dependent on you. (If you tell everyone everything you know, they’ll end up knowing more than you know. Having others dependent on you will also serve as great motivation, especially when times are tough and you need a reason to work harder than ever before.)

12. Win through your actions, never through argument. (At the end of the day, all that matters is that you make good trades or investment decisions. There’s lots of hype in this business and you should run, not walk, from anyone who spends more time talking than learning.)

13. Use selective honesty and generosity to disarm your victim.(Sorry, I’m not in agreement with this. In my view, you have to be honest with yourself and others at all times. In addition, generosity is always a good thing, especially when it is done without the desire of getting something in return. Having good Karma through generous acts also go a long way in keeping the trading gods on your side!)

14. When asking for help, appeal to people’s self-interest, never to their mercy or gratitude. (Sad, but true. If you can help others, they’ll be far more likely to help you. I know I always make a tremendous effort to help those who’ve helped me in the past.)

15. Pose as a friend, work as a spy. (You can find out more about people and companies you invest in by having friends who have specialized knowledge about certain industries. Their unique insight can be a powerful edge if you can get it. Sometimes a simple phone call or email to someone who works in the business will tell you much more than any chart or balance sheet.)

16. Crush your enemy totally. (When you’re right in a trade or investment and things are going well, don’t back off UNTIL you have good reason to sell.)

17. Use absence to increase respect and honor. (Knowing when not to trade is a skill few possess. Take vacations and breaks away from the market. It will only empower you to return refreshed, relaxed, and well-motivated. Remember, we trade to live, not live to trade. Achieving balance in your work and personal life will lay the foundation for long-term success.)

18. Keep others in suspended terror: cultivate an air of unpredictability. (It’s good to mix it up from time to time to relieve trading/investing boredom. If you think you’re in a rut, make some changes and go find something you can get excited about again.)

19. Do not build fortresses to protect yourself – isolation is dangerous. (Take time to bounce ideas off of people who are smarter than you. At all times, seek out opinions that are against you instead of with you – you’ll learn a great deal more. And, remember, no one is right all of the time. But some people are more right than others.)

20. Know who you’re dealing with – do not offend the wrong person. (As a small investor, it is best to avoid picking fights with market elephants (i.e. institutions, hedge funds) who think they know your stock better than you do. They have the power to move the market and your stock for longer than you have time or money to fight it.) (more…)

When does trading become gambling?

  
Analysis, Education, Life
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There is a very thin line. I maintain that most traders ARE gamblers. They use markets as a substitute for a casino. Here are some of the sign posts that you have crossed the line.

1. IF you enter trades without a clear trading plan, you just might be a gambler.

2. IF you trade just to be trading, you just might be a gambler.

3. IF your bored and enter a trade, you just might be a gambler.

4. IF you look at potential profit before assessing potential loses, you just might be a gambler.

5. IF you have no impulse control, you just might be a gambler.

6. IF you have no methodology, you just might be a gambler.

7. IF you rely on others for your trading decisions, you just might be a gambler.

8. IF you do not take full responsibility for your trading outcomes, you just might be a gambler.

9. IF you increase your risk due to losses, you just might be a gambler.

10. IF you do not use stop losses or do not adhere to them, you just might be a gambler.

And my all time favorite

11. IF you get an adrenaline rush when your entering trades, you just might be a gambler.

The Need To Be Right – Common Psychological Traps For Stock Traders

  
  Education
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Some thoughts on what characterizes great and successful traders:

  • Great traders graciously accept losses. They don’t need to be right all the time.
  • Great traders focus on proper execution not on the outcome of a single trade.
  • Great traders concentrate on good risk management. They constantly manage their open positions.
  • Great traders are emotionally detached. Single trades do not affect their mood.
  • Great traders don’t compare themselves to others. They isolate themselves from the opinions of others. 
  • Great traders are not afraid to buy high and sell low. 

As you probably know by now the single biggest mistake a trader can make is to hold on to a losing position. Failing to cut losses quickly and letting them develop into huge losses is mentally and financially devastating. The underlying psychology which is responsible for this behavior is the ‘need to be right’ and the fear to sell at a loss. What aggravates the situation is adding to a losing position.Dennis Gartman says: “Do more of the things that work and less of the things that don’t.“

Conclusion:
Isolate yourself from the opinions of other people. Make trading decisions your own. Focus on proper execution. Have the courage to do the right thing because it is right.

Black Belt Trading

  
  Education
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Black BeltJust like you shouldn’t practice your basic martial-arts forms in the ring where your mind is more focused on pain avoidance then executing the tactic correctly, a novice shouldn’t begin trading with real money and real consequences. Only once you’ve amassed significant practice in a safe environment where you can conduct your technical and fundamental analysis without being emotionally distracted should you begin to trade with real money. And when you finally start, don’t jump straight into the ring with Bruce Lee. Begin tentatively, gradually, slowly increasing your trading exposure over time as you become accustomed to the increasing levels of risk. How do you know you’ve moved too far, too fast? If you are finding it’s becoming harder to sleep at night, either because you are worrying about your trades or you are excited about your gains, then you have moved into the realm where your emotions are going to have too strong an effect. You are going to start making poor, emotionally-clouded decisions and so it is time to scale back.

Trading Wisdom – Jesse Livermore

  
  Education
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[” . . . remember that stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don’t make a second unless the first shows you a profit. Wait and watch.”]

Jesse Livermore reiterates the importance of buying with the primary trend and beginning new deployments in small increments. Since trends can run a long time, he wisely points out that absolute stock prices are really irrelevant for buying and selling decisions for speculators.

All that matters for speculators is today’s temporal position within the prevailing trend. If the trend has time to run yet then today’s prices really don’t matter. If you buy today on a bull trend that is not yet finished, odds are that your stocks will head to even higher prices before the trend reverses. Similarly if you short sell an already battered stock when a general bear trend hasn’t yet ended, then you will probably still earn a profit. The key is carefully watching the market conditions and keeping the pulse of the primary trend with which you are betting.

But, since we cannot know for certain how long a trend has left to run before it ends, it is wise to gradually scale in positions as Jesse Livermore taught. Start out by only deploying a fraction of your desired capital in your target bet. If you are right, and the profits come, then you can scale in more as time marches on. But if you are wrong and the markets move against you, the prudent use of scaling shields you from large losses and keeps your precious capital protected until a more opportune time.

Ray Dalio Principles

  
  Education
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  • I remained wary about being overconfident, and I figured out how to effectively deal with my not knowing. I dealt with my not knowing by either continuing to gather information until I reached the point that I could be confident or by eliminating my exposure to the risks of not knowing.
  • While most others seem to believe that learning what we are taught is the path to success, I believe that figuring out for yourself what you want and how to get it is a better path.
  • How much do you let what you wish to be true stand in the way of seeing what is really true?
  • How much do you worry about looking good relative to actually being good?
  • The most important qualities for successfully diagnosing problems are logic, the ability to see multiple possibilities, and the willingness to touch people’s nerves to overcome the ego barriers that stand in the way of truth.
  • Know what you want and stick to it if you believe it’s right, even if others want to take you in another direction.
  • In a nutshell, this is the whole approach that I believe will work best for you—the best summary of what I want the people who are working with me to do in order to accomplish great things. I want you to work for yourself, to come up with independent opinions, to stress-test them, to be wary about being overconfident, and to reflect on the consequences of your decisions and constantly improve.

Four Common Emotion Pitfalls Traders’ Experience

  
  Education
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Peak performance in trading is frequently hindered because of the emotions a trader feels, and more importantly how their trading behaviors change based on those emotions. I have found that the following four emotional experiences have the greatest, direct impact on a trader’s ability to achieve higher levels of success.

 

1)      Fear of Missing Out

2)      Focusing on the Money and Not the Trade

3)      Losing Objectivity in a Trade

4)      Taking Risk Because you are Up (or down) Money

 

Fear of missing out occurs when a trader is more afraid of missing an opportunity than they are of losing money. As a result, traders tend to overtrade in a desperate effort to ensure that they do not miss out on money-making situations. This overtrading can then potentially trigger an undertrading response if the traders experience a “trading injury” such as a big loss along the way. The way to solve this is first to accept the reality that you’re always going to miss out on something, somewhere. The second step is to establish game plans on paper and hold yourself accountable to executing those plans.

 

Focusing on the money and not the trade limits performance because the trader quantifies their success based on their profit and loss data. As a result, when he or she is up or down a certain amount of money that they view as significant, they alter their trading behaviors regardless of what the actual, real trading opportunity is that is presented to them. The way to solve this is to quantify your success based on HOW you traded not HOW much you made on the trade. Did you have edge? Was it your pitch? Did you make a high-quality trade?

 

Losing objectivity in a trade occurs because traders develop emotional ties to their previous entry levels. The trader is no longer making trading decisions based on the trade, but rather based on how much they are up or down in the trade. The key to overcoming this is for the trader to continually ask him/herself, “Why am I in this trade?” and “If I was not in this trade right now, would I enter this trade long, short or do nothing?”

 

Taking bad risk because you are up or down money

People do not like to lose – especially money. Normal solid risk/reward thinking becomes skewed once a trader is up a large sum of money. They begin to experience something called “mental accounting” and they treat money differently based on how they made money or how quickly they earned it. On the flip side, when traders are down money, they tend to be consumed with trading for revenge and trying to make it back, oftentimes as quickly as they lost it. As a result, they may take “shots” or do the “screw it” trade because they feel helpless. To solve this destructive behavior, the trader should use their trading journal to document their emotional highs and lows and what triggered it so they can be in tune with when they are feeling over-confident or angry/frustrated. Once they recognize these emotions, they should immediately call a time out and step away from the computer or reduce the risk they are taking until they can bring themselves back to center court.

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