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64 points : Traders Reality Wisdom

Knowledge only becomes wisdom if it is transferred and applied. I have compiled 65 of the best
tweets that focus on the psychology of trading. This is beneficial for those who would rather refer
to this document in their spare time, maybe print it off and have it near their trading desk?
Enjoy…
1. It’s so important to understand what is meant by failure? Failure occurs when you lack
knowledge, even if you have the knowledge and still fail…well I guess determination and
perseverance come into play.
2. If you are prepared to study an indicators entry and exit criteria, why would you assume
that is all that is needed to make money. Pay more attention to the function of how the
market works. Then you will realise that indicators alone are not sustainable.
3. You have to build calluses in your mind. The tough conditioning of losses builds a
character that eventually develops a discipline of awareness and embraces uncertainty.
Train your mind to lose, perform to win…
4. The development of a irrational trading mind starts with the traders lack of conviction on
their preferred trading personality. It’s paramount to your progression that you establish
your trading personality.
5. Most new traders are back testing how their method will perform. Most new traders
neglect to train the mind which = emotional imbalances?
6. A Trader that boasts of his victories, tends to be hiding his losses. Entertain the Trader
that talks of losses for he has been humbled.
7. I used to take losses and be angry. Then I accepted one important element in trading. I
HAVE NO CONTROL OF UNCERTAINTY.
8. Believe Me When I Tell You…Unless You Accept Uncertainty, You Will Forever Have
Expectations That Will Lead You To Losses. Learn Acceptance.
9. Some Are Happy To Accept Reality Of Being Correct But Not If Wrong. This Battle In Our
Mind Will Forever Obstruct Our Progression as Traders
10. Losses are Gold to every trader.
11. An Old Saying Can Be Related To This “Observe Your Enemies (Emotions) They
Highlight Your Faults.
12. Many Hide From Losses. Little Do They Know, Losses Are The Key To Changing And
Becoming Aware Of What Needs To Be Done To Improve.
13. Trade for the moment, for the dwelling on expectation of a move is sure to upset and
damage Trading moral.
14. The market will never teach you how to win. It will teach you how to become one with
your mind. The battle is in our minds
15. Never Start Your Trading Week Convincing Yourself How Much Money You Are Going
To Make. Focus On Trading Well. The Money Will Come…
16. Rule Of Sales: Customer Is Always Right Rule Of Trading: Market Is Always Right!
17. Taking Time Away From The Markets Creates Transparency In Your Mind To Correct
Behaviours That Sabotaged Your Trading
18. Your philosophy is the determining factor to your trading success
19. The minute that we change our minds and stop giving power to the past, the with its
mistakes loses power over us.
20. Our brains use biological mechanisms to translate expectations of what we want to
perceive…Manage these mechanisms to trade mindfully.
21. Why Get Mad If Your Indicators Give You A False Signal? There Is No Indicator That
Factors The Unknown.
22. Never be excited to trade…This will set you up to avoid taking losses…More importantly
feeding The Ego.
23. It is through adversity, are you then able to reset your mind and focus on forming new
habits to overcome the self limiting beliefs.
24. There’s no greater wisdom than of those who tell you not to make a mistake.I guess the
smart learns from himself.The wise learns from others.
25. The only factors that MM rely on is Fear and greed of retail traders. Not to forget that they
make the market. So they can see all orders and simply send price in that direction to get
their orders filled
26. Does your imagination as a profitable trader hinder your approach to trading
successfully? Do not be fooled by short term success.
27. A Trader Will Continue To Encounter The Dark Perils Of Trading… It Is Only When He
Accepts That He Is Allowed To Be Wrong, He Is Then Free
28. Trading is about the expression of one’s character to manage their behaviour through the
chaos of the financial markets. Only when he is one with his mind he expresses his true
ability as a mindful trader
29. Let’s Face It…Trading Is Like This…Some Will, Some Won’t, So What!!!! Next Trade. If
you understand this…You free your mind of expectation
30. It’s Really About Taking Your Profits And Accepting Your Losses. Everything Else That
Intervenes Is Bad For The Trading Soul.
31. Trading Safely Is Like The Habit Of Driving Safely, Always Pay Attention, Whether You
Are Angry Or Happy, You Still Have To Drive (Trade) Safely. Habit Will Protect Your Car
(Capital)
32. Results orientated: in poker, you have no control of the outcome of the flop. You only
have the strength of your hand to go by. Acceptance and understanding of variance
sustains longevity. This is no different in trading
33. The beauty of trading is this. The harder you work, the harder it is to surrender.
34. The only way you can really apply yourself when taking a trade is to not care…how do
you do it? Simple. Practise…like driving a car. Are you continuously conscious of
changing gears? No. Subconsciously you do it without hesitation. It’s the only way to
move forward.
35. Anyone that enters into the realm of trading usually has the perspective of “me against
the market”…The true reality is, it’s “ I Against I” before you confront the battle of trading,
confront the battle in your mind.
36. A mistake that traders make, one that took me a while to overcome was once I entered a
position,I turned from a trader into an investor…Biggest mistake you can make. If your
position is losing, get out, don’t “ride it” in hope it will return. Waiting to break even costs
money.
37. Trading same way you would on a roulette table: 1) you bet/trade 2) your number
hits/trade is profitable 3) you take your winnings/close trade. So why would you allow a
winning trade to turn into a loss. Take whatever is given by the market. You never knew it
would be a winner.
38. Admitting that you lose is the first step to transitioning as to why you lose. Many traders,
even myself, have struggled with accepting this. It’s only when enough money is lost that
you then decide, “to survive in this game, I have to accept it’s OK to be wrong”
39. When you decide to not allow your conflicts of the mind deter you from making
systematic and objective decisions, you will be taking the first step to becoming a trade
40. Once you detach from the money. You then become a trader. A trader thrives on the
process not the result. Being results oriented most likely guarantees expectations, which
definitely guarantees upsets and mistakes.
41. Many will learn from their mistakes, but few focus and study their behaviour when they
were right…Learning from mistakes saves you money…Learning from your wins, makes
you money.
42. A Retrace. The idea behind it is “oh it needs a break” or “it’s taking a breath”…that’s what
the MM want you to think. A retrace is a stop hunt for the market makers to suck in as
much liquidity as they can to fill their orders.Don’t be fooled.
43. When you learn to detach from what the market is fooling you to believe, you are then in
a position to take advantage of the market makers momentum. Get in and get out. The
market is no place for heros. You will get slaughtered.
44. The mind is a great thing. Funny how you place a trade and then all of a sudden the entry
you took does not seem to align with your analysis? Hindsight does that to you. But we
can avoid this by simply accepting what is and not focus on what it could be.
45. There were days when I felt compelled to trade. This was because I had FOMO. Fear of
missing out mindset is guaranteed to make you successfully lose each time you enter
into the market with this way of thinking. Cash is a position too.
46. If you really want to succeed in this game, you have to let go my friends. This game takes
no prisoners. It doesn’t care if you have £1m account or £1, to the market, it’s liquidity,
they will take it from you. Unless you learn to play the game.
47. The great thing about trading is, you only need to be right 50% of the time..there are
traders that are right less than 50% of the time and are profitable.???Money
Management and Mind Management
48. Be aware of the FOMC. This is a passport for the market makers to really take out areas
of liquidity for their own gain. If you have profited from today’s movements. Great…Don’t
give it back. Let the Dumb money get swallowed.
49. At some point you will develop the skill set to be able to close a losing position and re
enter. Avoid being results oriented, focus on the process of execution, if done correctly,
the results will always be positive.
50. Your objective as a trader is to survive. If you trade and win, great…Next trade. If you
lose and lose small, great…Next trade. It really is all about the process of entry to exit
and simplifying this behaviour by managing your emotional imbalances.
51. Avoid thinking like the herd. It pays to really focus on the behaviour of the one who
controls the herd. Then you will have you answer.
52. You will only improve your trading if you allow yourself to. The same way stands if you
close a losing position when your rules tell you too and close a winning position when
your rules tell you too. Become me aware of your behaviour, then you can grow.
53. It’s nothing to be afraid of…Losses are indefinite in this game…Just aim to keep them
small
54. Trading is all about gathering the wisdom of those who are prepared to share their
losses, their wins and determination to find the balance with their mind.
55. Who cares if you made a call and said price would hit a certain price area, are you a
genius? Have you developed a flawless consistently profitable indicator? Who cares!
Demonstrate your ability to manage risk effectively before you claim the title of “Trader”
56. If you feel the market is out to get you…your right…but the flip side, the market can be
very rewarding, it’s all down to perspective and mindset.
57. Don’t fool yourself into thinking that the current trade you have is the final one. There will
always be tomorrow.
58. It’s no secret, the market makers will manipulate price.They can also manipulate your
mind. If your thinking is irrationally based, then this is your greatest adversary. Fix your
thinking…Then you will see trading for what it is
59. I guess the greatest tool to a trader is a drawdown….this exposes you, to your faults and
thoughts. Using a drawdown can be advantageous and help you improve your trading.
Drawdowns happen regardless. It’s what you decide to take from each one.
60. If there is one thing I can share with everyone. If your trading. Always Always Always pay
yourself…This game is about longevity
61. So you are left with a zero account after you had received margin call on a position to
only see it be closed out…the irony is, the moment you placed the trade, your mind said
“that’s too much”, but greed stepped in…be systematic, not impulsive
62. I guess the key to trading successfully is to accept that you have no idea how the market
will behave…However, have a very clear vision of how much money you are willing to
risk. Always make money management your priority
63. Always always protect yourself…I guess the #science of boxing and trading are really no
different. The battle you must overcome is the battle of ” I Against I”
64. There is no indicator that will manage your emotions during trading. However, executing
a plan, without hesitation will eliminate you responding emotionally to any circumstance that arises in the market

Gerald Loeb’s Timeless Wisdom (1899-1974)

I’m sure you’ve heard the expression, “the more things change, the more they stay the same.”  Gerald Loeb used this phrase frequently.  I’ve always had great respect for Mr. Loeb.  True, he was an extraordinary investor and a best-selling author.  But what I most respected him for was his business acumen.  As one of the founding partners of E.F. Hutton, he was often quoted preaching to investors about the need to approach investing as a business and with a business mind.

Early on, I took his advice to heart.  From the very beginning, I always made certain that I organized my investing activities in a manner that yielded timely investment reports and minimized taxes.  I also sought out the best professional accounting, legal, tax and estate planning advice because this is what Gerald Loeb advocated. 

Personally, his advice has been validated over the decades.  Having known a large number of traders, I’ve observed that the most profitable ones have seldom been the smartest or boldest.  They are usually organized individuals who are willing to focus on the small details.  They are those people who are comfortable with routines and have the discipline to follow them.  I’ve often noticed that they’re unpretentious as well – even humble at times.  (more…)

Ten overriding principles

  1. Always live to fight another day
  2. Entries must have a statistical edge
  3. Patience and discipline
  4. Be a jellyfish (swim with the current)
  5. Trade only liquid securities
  6. Focus on trying to capture the middle 80% of a move
  7. Know your exit points when you open a position (and stick to them!)
  8. When in doubt, reduce position size by 50%
  9. Limit losses to 2% of total equity for any single trade
  10. Start each day with a clean financial and emotional slate

The above list is relatively generic, but it helped provide me with a framework for organizing how I would approach trading as a business, what strategies I should adopt, how those strategies should be executed, and ultimately defining what success should look like.

Trading rules are vitally important – as is knowing when they should be broken. Even more important, I believe, is the process that one goes through in order to arrive at these rules and to make sure that as new market situations unfold and new blind spots are revealed, the rules and guidelines are enhanced to maximize the opportunity for the trader to continue to grow and develop.

Profile Of The Successful Trader

Trading is being young, imperfect, and human – not old, exacting, and scientific. It is not a set of techniques, but a commitment. You are to be an information processor. Not a swami. Not a guru. An information processor.

Participating in the markets can only develop your trading skills. You need to become a part of the markets, to know the state of the markets at any given time, and most importantly, to know yourself. You need to be patient, confident, and mentally tough.

Good traders offer no excuses, make no complaints. They live willingly with the vagaries of life and the markets.

In the early stages of your trading career, pay attention not only to whether you should buy or sell but also to how you have executed your trading ideas. You will learn more from your trades this way.

Never assume that the unreasonable or the unexpected cannot happen. It can. It does. It will.

Remember, you can learn a lot about trading from your mistakes. When you make a mistake – and you will – do not dwell on the negatives. Learn from the mistake and keep going.

Never forget that markets are made up of people. Think constantly about what others are doing, what they might do in the current circumstances, or what they might do when those circumstances change. Remember that, whenever you buy and hope to sell higher, the person you sell to will have to see the same opportunity at that higher price to be induced to buy.

Traders who lose follow one of several typical patterns. Some repeatedly suffer individual large losses that wipe out earlier gains or greatly increase a small loss. Others experience brief periods during which their trading wheels fall off: they lose discipline and control and make a series of bad trades as a result.
Wise traders make many small trades, remain involved, and constantly maintain and sharpen their feel for he market. For all of their work, they hope to receive some profit, even if it is small in terms of dollars. In addition, continual participation allows them to sense and recognize the few real opportunities when they arise. These generate large rewards that make the effort of trading truly worthwhile.

At the end of the chapter he lists specific observations that have a high enough probability of reoccurring he considers them rules:

  • If you find yourself holding a winning position, adding up your profits, and confidently projecting larger gains on the horizon, you are probably better off exiting the trade. The odds are that the trade has run its course.
  • When entering a trade with a market order and your fill is clearly better than expected, odds are it will end up being a losing trade. Good fill, bad trade. Get out!
  • If all your ‘trading buddies’ agree with your expectations regarding the next big move, it probably will not work out. If everyone’s conviction level is as strong as the consensus, do the opposite.

Trader’s Emotions

The hardest thing about trading is not the math, the method, or the stock picking. It is dealing with the emotions that arise with trading itself. From the stress of actually entering a trade, to the fear of losing the paper profits that you are holding in a winning trade, how you deal with those emotions will determine your success more than any one thing.

To manage your emotions first of all you must trade a system and method you truly believe will be a winner in the long term.

You must understand that every trade is not a winner and not blame yourself for equity draw downs if you are trading with discipline.

Do not bet your entire account on any one trade, in fact risking only 1% of your total capital on any one trade is the best thing you can do for your stress levels and risk of ruin odds.

With that in place here are some examples of emotional equations to better understand why you feel certain emotions strongly in your trading:

Despair = Losing Money – Trading Better

Do not despair look at your losses as part of doing business and as paying tuition fees to the markets.

Disappointment = Expectations – Reality (more…)

Trading Psychology -Quotes

  • To be a successful trader/investor, your intellect and emotion must work as a team, which is easier said than done.”

– James Dalton

  • ” Successful traders accept and expect losses. Losses are endemic to trading; they are the cost of doing business. The consistently successful trader accepts deep in his heart that his winnings will be tempered with inevitable loss. But the trader anticipates his ultimate triumph because he has structured the probabilities in his favor”.

-LBR

  • “To be a successful trader you need to trade without fear. When you use fear as a resource to limit yourself, you will create the very conditions you are trying to avoid. Or to say this another way, you will experience your fears.”

-Mark Douglas

  • “The man who insists upon seeing with perfect clearness before he decides, never decides.”

– Henri-Frederic Amiel

  • “…to be a successful trader, I must love to lose money and hate to make money…The first loss is the best loss; there is no better loss than the first loss…Trading is a discipline.”

– EEK

  • “One of the critical criteria I use in judging my traders is their ability to take a loss. If they can’t take a loss, they can’t trade.”

– John Mack

  • “If you have bad inventory, mark it down and sell it quickly.”

 Alan “Ace” Greenburg

  • “Never meet a margin call. (In other words, if the market is going against you, concede defeat quickly and liquidate before you really lose your shirt.)”

– James Grant

  • “Fail Often but never quit.”

DIFFERENCE BETWEEN THESE TWO GROUPS OF TRADERS

two groups of tradersThere must be a difference between these two groups of traders – the small minority of winners and the vast majority of losers who want to know what the winners know. The difference is that the traders who can make money consistently on a weekly, monthly, and yearly basis approach trading from the perspective of a mental discipline. When asked for their secrets of success, they categorically state that they didnt achieve any measure of consistency in accumulating wealth from trading until they learned self-discipline, emotional control, and the ability to change their minds to flow with the markets.

Mark Douglas

Mark Minervini on discipline

Other than selling stocks short, I don’t know of any long-side method that works that great in a bear market. Very few stocks, even value stocks, can survive the wrath of a true bear decline.

The best leading stocks generally see their big performance a year or two into a bull market. I focus on those stocks in order to make a huge return in a relative short period of time. There is no need to be in the market all the time; in fact, I think there is grave danger in doing so. It’s like going out on a boat trip: you want to go out when the sky is blue and the seas are calm. Sure, you could stay out there and brave a hurricane and there would be a chance you’d make it through, but why would you want to do that, and how many times would you survive those conditions?

10 Rules for Traders

1. You Must Have a Game Plan
2. You Should Follow the Game Plan
3. Always Trade With a Stop Loss
4. Diversify Your Trades
5. Trade the Big Moves While Filtering Out the Small
6. Trade With the Overall Trend
7. Do Not Listen to the News; Only the Market
8. Don’t Listen to Your Broker.
9. Have Money Management Rules
10. Most Important: Have the Discipline to Follow the Rules

Day Trading Lessons..

analogyTo use a life insurance analogy, most people who become involved in the stock market don’t know the difference between a 20 year old and an 80 year old. Investing in the market without knowing what stage it is in is like selling life insurance to 20 year olds and 80 year olds at the same premium.

NEWS-You can’t listen to the news. You have to go with the facts. You need to use a logical approach and have the discipline to apply it. You must be able to control your emotions.