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Patience

  
  Education
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PATIENCE FOR U1) If you insist on trading during unstable or volatile markets, keep your positions small.

2) If you go into cash, don’t get upset on days when we rally, it’s simply part of the game.

3) Don’t buy or sell stocks because someone else is doing it. Have your OWN plan, find a philosophy that works for YOU, and don’t blindly follow anyone!

4) Wait for the wind to be at your back. Right now, it’s swirling. No sense in forcing trades to make a few pennies when there are dollars to be made in better environments.

5) Let the market correct, let the dust settle, don’t be in such a rush to trade. I see too many people trying to bottom-fish this market and I feel like screaming: “You don’t have to trade!”

I am not saying all this to be an ass. I simply want traders to learn from my mistakes. I have lost too much money in the past by forcing trades in unfavorable environments. You are better off protecting your capital and more importantly, protecting your confidence. Wait for proper bases to form, wait for some institutional accumulation, and wait for sentiment to be “less bullish.” In other words, wait for a healthier environment…it might not be that far away. The key right now is discipline and patience.

Discipline in Trading

  
  Education
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Discipline is important, especially in volatile markets.  Discipline is not something that you are born with it is something that has to be learned.  Think about a family member or even yourself, are you discipline and they are not or vice versa?  This has nothing to do with DNA.  You either want it or you don’t.  Or in my case, I was forced to have it.

Discipline is like any other habit, you have to build it.  If you don’t use it you lose it.

When a client is having trouble with discipline I ask them why they are trading.  There are three response:  It is fun/exciting, to make money, and the challenge.  If they’re main goal is doing it for fun and excitement than discipline is not required but I explain to them that it will prolong their fun.  If they’re doing it for money than it is necessary to survive the lean times. Discipline makes it possible to learn and adapt.  If you are doing it for the challenge I always go back to the time factor.  If it is worth doing than it is worth doing well.  I equate lack of discipline to wasting their talents and time.

The problem with discipline is that when you need it most it is the furthest thing from your mind.  Discipline doesn’t matter, getting your money back or profits is usually all that can fit into an untrained mind.

Trading Truths

  
  Education
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      1. It’s all about risk management … never risk what you can’t comfortably lose.
      2. Never fall in love with a stock.
      3. To be succesfull in trading; study, understand and practice. The rest is easier.
      4. Always start by assuming your analysis is WRONG and that people much smarter and with more recent information are already positioned opposite you.
      5. Never take on a position larger than your comfort zone. (Don’t overtrade)
      6. Patience. never chase a stock.
      7. Before entering the trade very think carefully what will make you wrong, write it down clearly and put it infront of you where you trade, and when your wrong get out happy you’ve followed your trading discipline.
      8. Buy strength, sell weakness. Most traders are essentially counter-trend; most traders lose.
      9. No one ever went broke taking a profit!
      10. Once you find a good one, hang on unless of course they do you wrong.
      11. Never add to a losing position! (Unless scaling in was part of the plan).
      12. Whenever you think you’ve found the key to the lock, they’ll change the lock.
      13. Do not overtrade.
      14. Trade price not perception.
      15. Know the difference between stocks that you want to stay married to and those that are just a fling.
      16. The only sure way to make a small fortune is to start with a large one.

        17. and to paraphrase Will Rogers: Buy only stocks that will go up. Don’t buy the ones that don’t go up. “THIS is GAMBLING.”

      17. Cut your losses quickly and you may have a chance. (more…)

      Top 10 Reasons Traders lose their discipline !!!

        
        Education
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      artimg53

      Losing discipline is not a trading problem; it is the common result of a number of trading-related problems.
      Here are the most common sources of loss of discipline, culled from my work with traders:

      1. Environmental distractions and boredom cause a lack of focus.
      2. Fatigue and mental overload create a loss of concentration. (more…)

      Why only 5% Traders earn ?

        
        Education
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      “I believe there are a few reasons why only 5% make it.

      1. They start in a position to not need to make a living from it. The need for steady money like a weekly paycheck will corrupt your thinking and force you to deviate from your plan of action that was so well thought out prior to the heat of the battle.

      2. They do not need the money that they loose. The enormous amounts of money that it requires to learn to daytrade would exceed most people’s lifetime income. What makes the number of successful daytraders so low is that even the few who could make it, dont have enough capital to endure the learning curve.

      3. They do not give a flying _uck about anything or anyones opinions of what the market will or might do. The very news and opinions that surround them becomes the mortar for their brick wall of defense that protects their completely independent thinking. (more…)

      Lose your money,but keep your discipline.

        
        Education
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      Trading is about following a method, system, or rules that give you an advantage over other market participants in the long run. There are good bets and bad bets. There are traders who follow a trading plan with discipline and others that start trading out of fear and greed after strings of losses or wins. Just because you lost money does not mean you made a mistake. Just because you made money does not mean you did not make a mistake. The goal of trading is to make money over the long term not be right every time. Losses are a part of trading. There is a big difference between a loss after following your plan versus a loss after a loss of discipline.

      Losses are simply getting out of a trade with less capital than you entered it. The question is was the loss due to your method or your lack of discipline?
      A mistake however can be many things, and mistakes can be profitable which is dangerous to the long term health of your trading account.

      1. Trading a position size so big that your risk of ruin is inevitable is a big mistake whether your individual trades are a win or a loss.
      2. Abandoning your method to start trading a different time frame or style than you have researched is a mistake because your edge is gone.
      3. Adding to a losing position is a big mistake because eventually you will be in the trade that does not revert to the mean and you lose your whole account.
      4. Believing that you are above your own trading plan and can start just trading as you wish is a death wish for your account.
      5. Trading based on beliefs instead of reality is a dangerous place to trade and is a mistake.
      6. Taking your entries a little sooner than they are triggered or an exit a little later than your stop loss is a mistake.
      7. Diversifying traded markets or stocks before doing the proper research is a mistake.
      8. Trading so big that your emotions interfere with your trading plan is a mistake.
      9. Trading when you are very sick or going through emotional personal problems is a mistake.
      10. Making trading decisions based solely on ego, fear, or greed is always a mistake whether you win or lose.

      Success

        
        Education
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      Success does not come from having one’s work recognised by others. It is the fruit of the seed that you lovingly planted.

      When harvest time arrives, you can say to yourself: ‘I succeeded.’

      You succeeded in gaining respect for your work because you did not work only to survive, but to demonstrate your love for others.

      You managed to finish what you began, even though you did not foresee all the traps along the way. And when your enthusiasm waned because of the difficulties you encountered, you reached for discipline. And when discipline seemed about to disappear because you were tired, you used your moments of repose to think about what steps you needed to take in the future.
      You were not paralyzed by the defeats that are inevitable in the lives of those who take risks. You didn’t sit agonising over what you lost when you had an idea that didn’t work.
      You didn’t stop when you experienced moments of glory, because you had not yet reached your goal.
      And when you  have to ask for help, you did not feel humiliated. And when you learned that someone needed help, you showed them all that you had learned, without fearing that you might be revealing secrets or being used by others.
      To him who knocks, the door will open.
      He who asks will receive.
      He who consoles knows that he will be consoled.

      Trading Emotions

        
        Education
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      Confidence Without confidence it is not possible to achieve much in other streams of life. In the equity markets, it is doubly true. If you lack in self-confidence, doubts may creep up in your mind. This may lead to indecision, which in turn lead to missed opportunities and losses. For day-trading and short interval trades, confidence is of utmost importance.On the other hand, on down days be careful. In many instances, you may be tempted to book small profits just to make your day balance sheet look pretty. This is not the issue. When you are faced with loss-making trades sooner or later, that same daily balance sheet will not look pretty at all.Never be far away from the correct principles of trading no matter what your mind is tempted to think. It is just too painful to reinvent the wheel.
      Discipline
      In order to be a successful investor/trader, you must be very disciplined. Stick to the plan of action. This means that you will stick to trading policies, trading plans and so on. Know your objective and work accordingly.
      Ideas
      Do not seek to implement new ideas that come all the time during markets. Remember, ideas are just ideas. If you feel there is value in them, they have to be thought about, refined, tested and then brought to the trading room. If you try to implement new ideas immediately to trading all you will do is to erode capital and confidence.
      Hope
      Do not allow hope to loiter anywhere close to your trading system. Hope has the potential to do maximum damage to your capital.

      5 Minutes of Daily Conditioning

        
        Education
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      Deciding to be a profitable financial trader is the first step in becoming one. Trite you say? Not really. Missing this one step or doing it out of order xplains why 90% of brokerage accounts go to zero within the first year, many doing so in the first 4 months!

      In addition to arbitrarily deciding to be a profitable financial trader, a more powerful and lasting way is to use psychological conditioning on yourself so that you CONSISTENTLY decide that you are a profitable trader Here’s my interpretation of the method for doing this that I learned from the famous success guru I alluded to in my comments two blogs back.

      First, write out the sentence below on a piece of paper.

      “FROM THIS MOMENT FORWARD, I AM A PROFITABLE TRADER”.

      Second, consider the pain you have experienced before because you have not consistently thought of yourself as a profitable trader. Imagine experiencing that again in the present and future. Do this for 30 seconds. Notice how you feel as you do that. (more…)

      The 10 trading commandments

        
        Education
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      1.) Respect the price action but never defer to it.

      Our eyes are valuable tools when trading, but if we deferred to the flickering ticks, stocks would be “better” up and “worse” down. That’s backward logic.

      2.) Discipline trumps conviction.

      No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always try to define your risk and never believe you’re smarter than the market.

      3.) Opportunities are made up easier than losses.

      It’s not necessary to play every day; it’s only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.

      4.) Emotion is the enemy when trading.

      Emotional decisions have a way of coming back to haunt you. If you’re personally attached to a position, your decision-making process will be flawed. Take a deep breath before risking your hard-earned coin. See related link.

      5.) Zig when others zag.

      Sell hope, buy despair and take the other side of emotional disconnects. If you can’t find the sheep in the herd, chances are you’re it.

      6.) Adapt your style to the market.

      Different investment approaches are warranted at different junctures, and applying the right methodology is half the battle. Map a plan before stepping on the field so your time horizon and risk profile are in sync.

      7.) Maximize your reward relative to your risk.

      If you’re patient and pick your spots, edges will emerge that provide an advantageous risk/reward. There is usually one easy trade per session if you let it show itself.

      8.) Perception is reality in the marketplace.

      Identifying the prevalent psychology is necessary when assimilating the trading dynamic. It’s not what is, it’s what’s perceived to be that dictates the price action.

      9.) When unsure, trade “in between.”

      When in doubt, sit it out. Your risk profile should always be an extension of your thought process and when unsure, trade smaller until you establish a rhythm.

      10.) Don’t let your bad trades turn into investments.

      Rationalization has no place in trading. If you put on a position for a catalyst and it passes, take the risk off — win, lose or draw. Good traders know how to make money but great traders know how to take a loss.

      There are obviously more rules but I’ve found these to be common threads through the years. Where you stand is a function of where you sit. So please understand that some of these guidelines may not apply to your particular approach.

      As always, I share my process with hopes it adds value to yours. Find a style that works for you, always allow for a margin of error and trade to win, never trade “not to lose.”

      And remember — any trader worth his or her salt has endured periods of pain but if we learn from those mistakes, they’ll morph into lessons. For if there wasn’t risk in this profession, it would be called “winning,” not “trading.”

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