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Five Rules of Wealthy Traders

  
  Education
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1.  Wealthy traders PLAN EVERY SINGLE TRADE. “In simple terms [wealthy traders] know exactly what they want to pay, how much money they anticipate making (or losing) and a very clear idea on the probability of the trade working out.”

2.  Wealthy traders STOPPED TRYING TO PICK TOPS AND BOTTOMS years ago.  “Simply put, 95% of the traders out there that make money are buying higher highs and selling lower lows. [Wealthy traders] do the exact opposite of nearly everyone out there because they found out long ago that picking tops and bottoms is a sucker’s bet.”

3.  Wealthy traders are PATIENT WITH WINNERS and RIDICULOUSLY IMPATIENT WITH LOSERS. “Most traders have a great deal of patience with their losers but get nervous about locking in gains and sell them to quickly – the exact opposite of what wealthy traders do.”

4.  Wealthy traders TRADE ONE MARKET. “Focus on trading one market exceptionally well rather than try to trade whatever’s hot – that’s how wealthy traders do it.”

5.  Wealthy traders gauge success on ANYTHING BUT MONEY. “The growing trading account simply becomes a nice result – a side benefit if you will – of making good decisions and reading the market well.”

Essential qualities for Speculator

  
  Education
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1)Self-reliance :A man must think for himself ,must follow his own convictions.Self-trust is the foundation of successful effort.

2)Judgement :That equipoise ,that nice adjustment of the facilities one to the other ,which is called  good judgement ,is an essential to the speculator.

3)Courage :That is ,confidence to act on the decisions of the mind.In speculation ,there is value in Mirabeau’s dictum :Be bold ,still be bold ,always be bold.

4)Prudence :The power of measuring the danger ,together with certain alertness and watchfulness is important.There should be a balance of these two ,prudence and courage ,prudence is contemplation ,courage in execution.Connected with these qualities ,properly an outgrowth of them ,is a third ,viz :promptness.The mind
convinced ,the act should follow.Think ,act ,promptly

5Pliability :The ability to change an opinion ,the power of revision.He who observes ,says Emerson,and observes again ,is always formidable.

Trading Principles

  
  Education
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• In life, as in trading, the right mindset is crucial for success. You must be confident in your decisions because they are based on cause and effect, not on emotions or opinion. Negative people who are unsure of themselves are not successful in any field. You need faith in yourself and your methods to be able to persevere and not give up before reaching success.

• You can risk too much and lose it all in your business, life, marriage, friendships or family. You have to measure the potential cost of every action. One affair can cost you your marriage, just like one big trade with too much risk can cost you all your capital.

• In business there are certain methods which bring in customers and turn a profit, and others which cause a business to turn away customers and lose money. Trading is similar: methods which turn a consistent and long-term profit are essential for success.

• Having unrealistic expectations in a marriage, job, or business will lead to unhappiness and failure just like it will in trading. You have to set realistic expectations so
you do not get discouraged easily and quit in any of these areas. You have to be satisfied that the results are worth your effort over the long term. You need to understand what to expect before you begin a marriage, a job, a business, or trading.

• Those who succeed in all areas of life are the ones who can manage stress the best. The best way to manage stress is to increase what you can handle step by step so that you grow into new circumstances. Another way to manage stress is to avoid actions which get you into situations you are uncomfortable with.

What characterizes great and successful traders

  
  Education
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  • Great traders graciously accept mistakes. They don’t need to be right all the time. Thoughts-Trading
  • 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.  “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.

    • 10 Pitfalls of Trading & Answers

      
      Education
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    What are the 10 major mistakes that these traders make that cost them dearly?

    1. Having no trading plan

    When you don’t have a plan, you don’t have a template to follow. It becomes very costly when your emotions are high and you have to make decisions on the fly.

    1. Using strategies that do not match your personality

    You hear of a trading strategy that has worked very well and you are anxious to follow it. One important factor to consider is: does it match who you are and your lifestyle?

    1. Having unrealistic expectations

    Most traders assume that it is very easy to make money in trading. They have unrealistic expectations with regard to their initial capital, their risk profile and how much money they can expect to make.

    1. Taking too much risk

    Usually when traders are down, they want to make their money back very quickly. Therefore, they increase their position size without thinking about the risk/rewards.

    1. Not having rules to follow

    Most traders think if they have rules to follow, they are restricting themselves. It is on the contrary. Having rules allows you to be more flexible since you have thought about lots of issues beforehand.

    1. Not being flexible to market conditions (more…)

    Best Practices for Traders

      
      Education
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    1) Preparation to start the day and week: Having a clearly formulated strategy to guide trading decisions;

    2) Keeping score: Using a trading journal to structure learning, document progress, and sustain positive motivation;

    3) Managing risk and maximizing opportunity: Trading with more risk/size when trading well and clearly seeing opportunity and pulling back risk when drawing down, trading poorly, and perceiving little opportunity;

    4) Taking breaks: Stepping back from markets periodically to gain fresh perspective, reformulate views, and tweak strategies;

    5) Treating trading as a business: Limiting overhead, having a clearly defined plan to move toward profitability, focusing on distinctive areas of strengths and opportunity.

    So much of what makes traders great is what they do between market sessions, how they do it, and how much of it they do.

    20 Trading Skills for Traders

      
      Education
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    1.      Know the difference between trading and investing.  We are traders, NOT investors.  ••  Disciplineis doing the right thing at the right time…every time! Survival in this business is dependent on the right decisions.

    2.      Don’t let losers run!  Always use stops .  Riskmanagement is very, very important in your trading.  Don’t be stubborn in holding a position. Remember, while you may not be wrong often, The Market Is Always Right.  The best traders are the first to admit (to themselves and the market) that they made a mistake.

     3.      Trade only price pattern set-ups.

     4.      Trade for skill, NOT the money.  If you’re focused on the money aspect of trading…you’re not focused on the ‘trade’.  And SCARED MONEY NEVER WINS!

    5.      Concentrate on what you are trade.  Each market has personalities, habits and friends…get to know them all.

     6.      Focus on your executions.  Remember, every execution is a trade.  Money is valuable…don’t leave it on the table.

     7.      Model Yourself After Successful and Experienced Traders.  You will be all you can be…but you need to start somewhere. 

     8.      Be Teachable.  Learn something new every day (or at least every week).  The ‘Losing’ and ‘Winning’ trades can teach you a whole lot.

     9.      Remember that even the best of the best traders lose money.  Learn to accept your losses and move on to the next trade.  That’s just part of the business – you will NEVER win 100% of the time.

     10.  Use only 1 contract at the beginning.  Large wins at the beginning generally means large exposure. (more…)

    5 “Common” Rules of Great Traders.

      
      Education
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    1. They react and make few decisions. They do plan every trade. They just plan a lot faster. The market moves fast, so do they. A plan is somehow neglected by many. Would you start a business without any plans? Do it already. You will improve.

    2. They make most of their money on the highs or lows. There will be interest at the highs and lows, they use it to buy and sell into. They are already in a position when it gets there. It is a place that most people are looking at. The market actions will dictate further moves. I disagree that they stop picking tops and bottoms. They just are aware that is the type of trade they are taking. High risk, high reward.

    3. They get out on the best tick. On a winner or a loser. See rule 1 and 2. I am not sure why no one ever talks about this, including here. Execution is as important as any other skill.

    4. They accept responsibilities for their actions. They do not socialize losses and privatize wins. It is all privatized. They eliminate mistakes and learn more cheaply than others. I do not know if they only trade one market but they are experts on themselves.

    5. Success is the end point. They can already pay their bills. They are actually trading with risk capital. They can focus on the market and keeping their TEE in balance. Percentage gains are very important but they are not indicative of future returns. Their measurement is based on how well they executed their plan.

    3 Alexander Elder’s Words of Wisdom

      
      Education
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    You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody. This is the life of a successful trader. Many aspire to this but few succeed. An amateur looks at a quote screen and sees millions of dollars sparkle in front of his face. He reaches for the money – and loses. He reaches again – and loses more. Traders lose because the game is hard, or out of ignorance, or lack of discipline or because of both. – ALEXANDER ELDER

    Every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management. These essentials are like three legs of a stool – remove one and the stool will fall, together with the person who sits on it. Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively on trading systems. Your trades must be based on clearly defined rules. You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound. You have to structure your money management so that no string of losses can kick you out of the game. – ALEXANDER ELDER

    Markets offer unlimited opportunities for self-sabotage, as well as for self-fulfillment. Acting out your internal conflicts in the marketplace is an expensive proposition. Traders who are not at peace with themselves often try to fulfill their contradictory wishes in their market. If you do not know where you are going, you will wind up somewhere you never wanted to be. You can succeed in trading only if you can handle it as a serious intellectual pursuit. Emotional trading is lethal. To help ensure success, practice defensive money management. A good trader watches his or her capital as successfully as a professional scuba-diver watches his or her air supply. – ALEXANDER ELDER

    Three Essential Components Of Trading

      
      Education
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    These essentials are three legs of a stool – remove one and the stool will fall together with the person who sits on it.

    Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively on trading systems.

    Your trade must be based on clearly defined rules.
    You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound.
    You have to structure your money management so that no string of losses can kick you out of the game.
    Every winner needs three essential components of trading: a sound individual psychology, a logical trading system and a good money management.

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