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Trading Wisdom

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”

Techniques of Tape Reading

technique-animatedThis (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.

What are you certain about the market or trading?

If I do not take it will take from me.
You are only as good as your last trade.
Rigidity and complacency ends careers.
Always get paid for taking risk.
A trend never ends when it should.

I am certain that the only way for me to have a chance to be a successful trader is to do daily work and not become lazy or use shortcuts.

I am certain I would rather take every planned trade and lose than not execute a planned trade.

I am certain I am always uncertain before taking a trade. I am certain when I am most relaxed in my mind is when I am doing the right thing regardless of the outcome.

I am certain there is no mathematical (technical) formula to beat the market. If there was, there wouldn’t be a market.

I am certain that opportunities are easier made up for than losses. I add one more: I am certain that the habits or procedures we resist represents our true trading system at that moment.

I am certain that trying to ‘predict’ will end in failure.

I am certain that most of my trades that I convince myself to make investments will end up losing money.  I am certain that if I do not plan a trade including stop loss  points I will be sorry.  I am also certain that I will violate both of the above sometime in the next month.

I am certain that I know myself…. or at least I think I do for the moment.

I am certain that uncertainty is a concept that most traders need to come to terms with before any sort of success will be attained.

5 Trading Pitfalls and how to Solve Them


Pitfalls
1. Focusing on the P & L

2. Losing objectivity while in a trade

3. Becoming emotional about a trade

4. Lacking confidence: exiting early, failing to put a trade on, not sizing up

5. Difficulty adapting to a changing market

Solutions
1. Quantify success base on the caliber of the trade (i.e. high quality entries/exits).

2. Continuously ask yourself, “is my original reason WHY I entered this trade still there?”

3. While you are in a trade, ask yourself, if I had no position on right now, what would I do? Buy? Sell Short? Do nothing? Then re-evaluate your trade size and direction.

4. Confidence should always come from within. Step#1: Write bullet list of data points proving WHY you are a skilled trader. Step #2: Prime yourself each morning by reading it over to yourself. Could be the most valuable 30 seconds you spend each day.

5. Flip your perspective by keeping track of what is not working (by default this tells you what IS working).

Keep your eye on the ball and your head in the game!

Herd Mentality

“Making money is easy, it is keeping it that is hard.” 

Keeping the profits is what successful trading is all about. It’s not about making money. It is about risk management. Good risk management translates into good profits. Great risk management translates to great profits and a long-term career.

So what about the herd mentality?

You have all heard about it over the years. Psychologists talk about it all the time, but how does it play out in the applied trading world?

The cliché is that following the herd is dangerous – bad for trading and leads to huge losses.

But my perspective is different and one that states that following the herd is  bad only if it was not YOUR game plan. You see, traders don’t mind losing money. That’s right. They don’t. What they mind is losing money doing stupid things. And one of the stupidest things a trader can do is to follow someone else’s game plan instead of their own.

If you are going to lose money (and you are going to about half the time) then you might as well lose it doing the right thing, which is listening to YOUR ideas. Your instincts. Your research and YOUR game plan.

Trading is not complicated. We make it complicated.

Simplify the process. Break your trading down to its basics and follow your plans. And if your plans happen to be in line with the herd, then so be it. And if they don’t, that is fine too. The point is to be consistent in your approach and let the market come to you.

20 Skills for the Trader

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. (more…)

Two quotes from :REMINISCENCES OF A STOCK OPERATOR

Doing The Right Thing

The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itself if the other things are attended to. A trader gets to play the game as the professional billiard player does—that is, he looks far ahead instead of considering the particular shot before him. It gets to be an instinct to play for position.

Price Tendency

You watch the market—that is, the course of prices as recorded by the tape—with one object: to determine the direction—that is, the price tendency. Prices, we know, will move either up or down according to the resistance they encounter. For purposes of easy explanation we will say that prices, like everything else, move along the line of least resistance. They will do whatever comes easiest, therefore they will go up if there is less resistance to an advance than to a decline; and vice versa.

Risk:Reward

The typical trader is not profitable, and I suggest that one must learn to operate differently than the typical trader.  One example is how the typical trader looks at risk versus reward. I’m not talking about probabilities or risk:reward ratios, I’m referring to something entirely different.  One of the things I do in my work with traders is teach them to look at it the following way: The trader determines the risk, but any potential reward is determined by the market. Thinking about risk versus reward in this fashion has a number of benefits.

It helps operationalize what I mean when I talk about focusing on what we can control and letting go of the rest.  It is also a good example of one of my rules in action, that we must be rigid with risk but flexible with expectations. This is part of the bigger picture of focusing on doing the right thing versus focusing on being right. And as I talked about in my recent webinar, a specific technique is for a trader to continually ask the following question at each point during the trading process when a decision or action is about to made: “Am I acting in my own best interest right now”.

Trading well over time requires that we control the risk and must be flexible with expectations by accepting the fact that we must adapt to what the market is doing regardless of our wishes.  It also serves as a reminder that upon entry, a trader is essentially assuming that if they go long/short they believe (and need)  other buyers/sellers are going to step in afterword and move the market even further by paying worse prices.

More on this extremely important idea of accepting risk and managing expectations in future posts.

20 Trading Skills for Traders

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 Trading Pitfalls and how to Solve Them

 I have observed that Losing money doing the right thing does not destroy a traders’ mental focus. It is when they lose money doing the wrong thing…That is what truly eats at their soul and messes with their head.

With that said, the following are 5 common pitfalls I have seen traders experience and I have listed 5 practical solutions you can quickly implement to overcome these assassins to your performance.

Pitfalls
1. Focusing on the P & L

2. Losing objectivity while in a trade

3. Becoming emotional about a trade

4. Lacking confidence: exiting early, failing to put a trade on, not sizing up

5. Difficulty adapting to a changing market

Solutions
1. Quantify success base on the caliber of the trade (i.e. high quality entries/exits).

2. Continuously ask yourself, “is my original reason WHY I entered this trade still there?”

3. While you are in a trade, ask yourself, if I had no position on right now, what would I do? Buy? Sell Short? Do nothing? Then re-evaluate your trade size and direction.

4. Confidence should always come from within. Step#1: Write bullet list of data points proving WHY you are a skilled trader. Step #2: Prime yourself each morning by reading it over to yourself. Could be the most valuable 30 seconds you spend each day.

5. Flip your perspective by keeping track of what is not working (by default this tells you what IS working).