Paul Tudor Jones:
“We have tested every system under the sun and, amazingly, we have found one that actually works very well. It is a very good system…(under the realm of) trend following. The basic premise of the system is that markets move sharply when they move. If there is a sudden range expansion in a market that has been trading narrowly, human nature is to try and fade that price move. When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.”
“The most important rule of trading is to play great defense, not great offense.”
“I don’t really care about the mistakes I made three seconds ago in the market. What I care about is what I am going to do from the next moment on. I try to avoid any emotional attachment to a market.”
” I always believe that prices move first and fundamentals come second.”
Gary Bielfeldt:
“The best thing that anyone can do when starting out is to learn how a trend system works. Trading a trend system for a while will teach a new trader the principle of letting profits run and cutting losses short. If you can just learn discipline by using a trend-following system, even temporarily, it will increase your odds of being successful as a trader.”
Richard Dennis:
“You should expect the unexpected in this business; expect the extreme. Don’t think in terms of boundaries that limit what the market might do. If there is any lesson I have learned in the nearly twenty years that I’ve been in this business, it is that the unexpected and the impossible happen every now and then.”
“A good trend following system will keep you in the market until there is evidence that the trend has changed.”
“The correct approach is to say: ‘This structure is up, and this structure means no more, but never that this structure means up this much and no more’.”
“I could trade without knowing the name of the market.”
“The market being in a trend is the main thing that eventually gets us in a trade. That is a pretty simple idea. Being consistent and making sure you do that all the time is probably more important than the particular characteristics you use to define the trend. Whatever method you use to enter trades, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend.”
Archives of “discipline” tag
rssThe way to learn
Learning to trade is not very different from learning any other discipline. It takes a lot of efforts and finding the right teachers. At some level of experience, the best teacher for you will be you, but before such level is reached having someone to show you the direction of least resistance is priceless.
For example, in his early years, one of the most notorious composers ever – Mozart, imitated and mimicked the work of others. From their lessons, later in his life, he gradually builds his own unique style. This is a common path to success in music. Common path to success in trading.
In music first you learn the notes. Then you try to replay other guys’ compositions until one day you start to compose in your own unique style. In trading, first you learn the basics of supply and demand, some common market anomalies and basic market psychology. Then you read about other, already successful, people’s methods and try to mimic them until one day you become experienced enough to create your own style of trading that satisfy you financial and personal goals best. These are three different levels of expertese in each field and they should be mastered in the mentioned sequence.
Techniques of Tape Reading
This (Trading) is not a job where you get paid by the hour.
You get paid for doing the right thing.
Forget that your money is at stake. Money in trading account is just a tool for making money. Preserve your tool. You need it to make money.
Don’t let the outcome of one trade alter your trading discipline. One trade doesn’t make a system…
Trading is a game of probabilities. You don’t have to be right every time. You just have to follow your rules.
You decide your fate; the market doesn’t.
Pure followers of stock pickers will never be around… Learn or you are bankrupt.
Be aggressive in trending market and conservative in choppy market.
Take home runs when you can, but don’t beat yourself up about missing a few.
One trade should never make or break your account.
The Battle is With Yourself
“Years of experience eventually teach you that your main battle, always, is with yourself — your propensity for errors, for rationalizing marginal hands into good hands, lack of concentration, misreading other players, emotional eruptions, impatience, and so on. Your opponents are merely dim outlines that come and go. Few of them ever reach the exalted heights of damage that you can inflict on yourself.”
– Larry Phillips, Zen and the Art of Poker
Many great traders have expressed some version of the opinion, “Your greatest opponent is yourself.” Do you agree?
If so, what are the implications?
On the positive side, if “we have met the enemy and he is us,” as Pogo once said, what does that say about growth opportunity?
If you had perfect discipline, perfect motivation, and perfect emotional control, how good (or great) a trader could you be?
Paul Tudor Jones – 60 Minutes Interview
Jones is considered one of the best traders in the business for one main reason: CONSISTENCY! He has produced positive returns for 25 straight years! I don’t know the exact number of years, but you get my point. The fuel behind his consistency is his discipline, specifically his ability to manage risk and cut losses.
Besides his tremendous success as a trader and a hedge fund manager, what makes Jones an even bigger hero in my view is his philanthropy. I love the phrase “The secret to living is giving” and Jones truly exemplifies this quote. In other words, what’s the point of being successful if you never give back to others? As Jones says in this 60 Minutes interview: “You find your joy in life through service and sacrifice.” Enjoy the video!
Must Watch !
HOW DISCIPLINE HELPS IN TRADING
“Discipline in executing each and every trade according to your trading methodology is the secret to your success. If you want to improve your trading, what you need to do is very simple. Before you enter any trade, imagine that you will have to explain this trade to a panel of your peers, by explaining to them the reason for your entry, your money, trade, and risk management guidelines, and why you exited the trade. Imagine having to explain why you chose this particular market and this particular time frame, along with how you set objectives for the trade, and how you determined where your initial protection would be. If you can truly do this, I strongly believe that you can be successful.
Just prior to entering every trade, try to imagine yourself executing the trade perfectly. Imagine how it will feel when you enjoy having made money with your trading.
Yes I know, you don’t have time to do that. Why? Because you never plan your trades ahead of time. You probably don’t have a strategy, and instead of waiting patiently for trade that meets your well-defined parameters and your thought-out plan, you just jump in the minute you think you see something that looks good.
You need to take a lesson from a spider. The spider waits patiently in his web until some unsuspecting insect flies into the spider’s trap.
Have you been flying into any of my traps? I wait for trades that meet my expectations, trades that fit my plan. I wait patiently, and being kind-hearted I don’t want any of my readers to land in my web. I’d rather the unsuspecting are readers of someone else’s newsletter. But it’s amazing how often I get to feed.”
Trading Lessons
The market is a tough battle. Each day there are chances and opportunities to make money though, it is the greatest form of free market capitalism known to man. It’s a vast ocean with treasures; we just have to be able to unearth them at the right moment. We have the ability to navigate carefully through markets, put our bets out there and see where the chips fall.
But if we are too loose with our capital then we are headed for a bad ending. Discipline is one of the keys to success: learn your craft and practice. Each day that passes is one more great learning experience – capture it, analyze it and grow from it. Use a trading system, pay attention to the timeless patterns of price/volume and believe in what you see and not what you hear. (more…)
Confidence, Discipline and Consistency
Consistently profitable trading comes down to just three simple things. The three are the trading psychology, the system, and the risk and money management. Trading psychology means the big 3: discipline, confidence and consistency.
The trading psychology takes precedence because it is needed to make sure that the other two are followed. When they are not followed, a good system and sound risk and money management rules are of limited value. When you have trading psychology that is not achieved through sheer will, you can have the discipline, confidence and consistency that make the most of your rules and system.
Sticking to your system for any length of time is nearly impossible without having confidence in your system. A trader may be able to focus intently on their discipline, and may even be able to stick to it for a time, but often the first handful of losing trades will kill that confidence and with it goes the discipline.
When the sting of a string of losses comes along, especially for a trader that has not established a solid confidence in their system, the temptation to deviate from the system, to second-guess it, is very strong. The natural impulse to avoid the pain is great and only grows with each subsequent loss. Faith in the system drops each time another loss occurs, even if the loss came to be from the deviation from the system. In these circumstances, doubts, fear and anxiety usually run high.
So what is a trader to do to avoid this situation, or to remedy it if this situation has already been encountered?
A great deal of trading psychology comes from expectations and reality. Frustration comes when expectations aren’t met by reality. When a person doesn’t know what to expect, then anxiety set in. When a person knows what to expect and what to do, then confidence is there. Worst case is when the primary point of reference is the recent and painful losses, and only slightly less difficult to be confident when matters feel very uncertain.
Since trading is an activity where losing trades will occur, the best way to establish confidence is to have a way to know what to expect – from the trading system. What is the way to make this happen? The trader can see what can realistically be expected and what can’t through system analysis and looking at the system metrics. The metrics give one a realistic and measured look at the capabilities and limitations of a system, particularly how many losing trades might be encountered during an overall profitable period of time. The primary benefit regarding the trader’s trading psychology is in the way the numbers from the analysis put things in a perspective that fends off the anxiety and doubt and makes for much easier discipline.
Once this is achieved, then the trader should track their metrics to ensure consistency and continuous improvement. It happens quite commonly for traders to experience major breakthroughs once they put in place the habit of analyzing their system and tracking the metrics. Confidence, discipline and consistency are the natural result of this activity, and frequently initiating this practice marks the turning point in the careers of many traders. It is vital as part of trading psychology that one properly analyze the metrics and track their numbers, as backtesting alone will only help to a limited degree.
Being confident
Being confident is the ultimate prize for any trader; some call it being in the “zone”, some others talk about finding the “Holy Grail”. What it really means is that, as for any performance based endeavours, trading will satisfy you only once you reached the state where “you know what you do”. Trading is not different from any other demanding undertaking, it requires mastering the different stages of the learning curve and the quality of this learning process depends on how focused and disciplined the trader is in honing his acquired skills. Once the trader has identified, through practice, what markets, methodology and timeframe he is comfortable with, he will slowly gain confidence in himself by systematically repeating all of the steps that constitute his trading plan until it becomes part of his personality. Just as for a tennis or a golf player, being confident makes the difference between winning and losing, so it is for the trader. And, just like the tennis or golf player, the trader can only gain this confidence through a well worked out set of skills, a battle plan and the continuous practice at a performance level. Losing focus or relaxing the discipline will very rapidly threaten the trader’s confidence. Hence, it is of the utmost importance to understand that this virtuous circle has to be maintained during every trade. And here we touch the challenge for any trader: only the repetitive and focused practice of his plan will ensure that he will stay confident in his trading. This can only be achieved through a balanced and healthy way of living and a sound detachment of the day to day results.
Discipline-Risk Managment-Passion for Traders
- DISCIPLINE: The trader must have the ability to control themselves and follow a plan. Discipline is a required skill in trading without it there is no edge, you are either a gambler or simply trading off fear and greed. You will not be successful, instead you will be gamed by those in control of their emotions.
- RISK MANAGEMENT: Risk management must be a top skill for a trader to even survive in the markets. You must structure your risk per trade to be no more than risking 1% or 2% of your trading capital. You have to be able to survive 10 losses in a row. These strings of losses come around more often than a new trader would suspect. If you lose just 5% of your trading capital in each of ten trades you will be down almost 50% and need a 100% return just to get back to even. At this point you are ruined.
- PASSION: A trader must love to trade, without a passion for the markets and trading the new trader will not survive the learning process because anyone with common sense would believe that it was not worth the struggle. Passion will be needed to bring a trader through the learning curve and later the losing streak.