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.
What characterizes great and successful traders
Archives of “do the right thing” tag
rssThe Stock Trader's circle of Sucess and Failure
The following graphic describes two types of traders. The first (the circle on the left) describes what I believe to be the characteristics of all beginning traders, most of which end up quitting. There is a progression here from bad to worst. However, if the beginning trader can break through this cycle somewhere around undisciplined fear (#3) and paralysis of analysis (#4), the chances of his success improves exponentially.
THE LOSER’S CYCLE OF DESPERATION
Simply put, a trader enters the stock market with little if any knowledge about what to expect. How can he? No experience = no knowledge. Not only that, but his expectation of untold riches distorts his perception of reality. Once in the market he seeks the holy grail that will make him rich. When he doesn’t find it he continues his search as fear begins to shackle his feet. The fear leads to paralysis of analysis or the thinking that the more indicators and patterns and candlesticks etc. that he uses the more likely he will win. Wrong! (more…)
Six Rules of Michael Steinhardt
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.
2. always make your living doing something you enjoy: Devote your full intensity for success over the long-term.
3. be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.
4. make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.
5. always trust your intuition: Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.
6. don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.
Traders Daily Lessons
Have the courage to say no.
Have the courage to face the truth.
Have the courage to do the right thing because it is right.
– W. Clement Stone
Have the courage to say no.An inner dialogue typically reinforces the way you think. So the goal is to consciously expose yourself to thoughts that ultimately will positively impact your trading. Through the use of repetition you can considerably strengthen a positive attitude and sound trading behavior. The beauty of it is the simplicity of the method. It’s entirely up to you which trading mantras you want to adhere to. Here are a few that I strongly believe in and that characterize my thinking as a trader:
- Kill your greed
- Isolate yourself from the opinions of others
- Never chase stocks
- Always strive for emotional detachment
- Focus on proper execution
- There is never a shortage of opportunities
- Never make excuses
- Stay in control
- Don’t compare yourself to others
- Always use stop losses
- Standing aside is a position
- Money comes in bunches
- Never add to a losing position
- Stay calm and focused
- Don’t believe the hype
- Cultivate independent thinking
- Be ready for worst case scenarios
- Nosce te ipsum – Know thyself
Characteristics of Successful Traders
1. CONFIDENCE: absolutely essential in an environment that feeds on emotional instability.
2. TRUST: if you cannot trust yourself who can you trust? Trust your rules, trust your edge, trust that you will do the right thing-no matter what!
3. FOCUS: you will never learn all there is to learn about the market. Push your ego aside and focus on one market and one edge.
4. ACCEPTANCE: you have to accept what the market is willing to give or you will give the market what it wants to take. (more…)
Self-Awareness
“You can’t kid yourself in trading. You have to deal with who you really are, and take responsibility for all your shortcomings, which the markets have a way of revealing rather starkly. You have to confront all your fears and tame them. You have to check your ego at the door.
You learn from each experience. There’s nothing in life that you can do that can guarantee that you’re not going to go through some pain. Trading is certainly not a singular pursuit in that regard. What I have learned is this: Patience and diligence are rewarded. Profits will eventually accrue if you do the right thing and stick with it. That’s the most important thing!
Six Rules of Michael Steinhardt
Michael Steinhardt was one of the most successful hedge fund managers of all time. A dollar invested with Steinhardt Partners LP in 1967 was worth $481 when Steinhardt retired in 1995.
The following six rules were pulled out from a speech he gave:
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.
2. Always make your living doing something you enjoy: Devote your full intensity for success over the long-term.
3. Be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.
4. Make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation. (more…)
“What advice would you give to a novice trader?” by Jack D Schwager
This was taken from the book “The New Market Wizards”, it’s one of the questions posted by Jack D Schwager to Gil Blake. And this was his answer:
“There are five basic steps to becoming a successful trader.
- First, focus on trading vehicles, strategies, and time horizons that suit your personality.
- Second, identify non-random price behaviour, while recognizing that markets are random most of the time.
- Third, absolutely convince yourself that what you have found is statistically valid.
- Fourth, set up trading rules.
- Fifth, follow the rules. In a nutshell, it all comes down to: Do your own thing (independence); and do the right thing (discipline).”