- You must have faith in yourself. You must believe that you can trade as well as anyone else.. This belief arises from doing your homework and staying disciplined in your system. Understanding that it is not you, that it is your system that wins and loses based on market action will keep the negative self talk at bay.
- You must have faith in your method. You must study the historical performance of your trading method so you can see how it works on charts. Also it is possible to quantify and back test mechanical trading systems for specific historical performance in different kinds of markets.
- You must have faith in your risk management. You must manage your risk per trade so it brings you to a 0% mathematical probability of ruin. A 1% to 2% of total capital at risk per trade will give almost any system a 0% risk of ruin.
- You must have faith that you will win in the long term if you stay on course. Reading the stories of successful traders and how they did it will give you a sense that if they can do it you can to. If trading is something you are passionate about all that separates you from success is time.
- You need faith in your stock. It helps in your trading if you trade stocks, commodities, or currencies that you 100% believe in. Traders tend to have no trouble trading a bullish system with $AAPL if they believe it is the greatest company to ever exist and will go to $500 within six months. It is much easier to follow an always in trend reversal system with Gold if you believe it tends to trend strongly one way or the other. Of course you have to follow a defined system and take the signals even if it goes against your opinions but believing in your trading vehicle helps tremendously.
Archives of “faith” tag
rssHow To Make Your Own Luck in Trading
The only place luck has in trading is that you will hopefully be on the right side of unexpected moves due to surprises. In trading you should trade in such a way that good luck will benefit you and bad luck will not destroy you. In my trading luck has little to do with my profits. I trade when the probabilities are on my side based on what the chart is saying about the current action of buyers and sellers in a stock. New traders hoping for luck belong in Las Vegas not the stock market. Trade the trends, play the odds, manage the risk, have faith in yourself that you have the discipline to trade your winning plan.
- I do not trade on luck I trade with probabilities being on my side.
- I manage my risk carefully so bad luck on one trade does not blow up my trading account.
- I trade in the direction of the markets current trend to enable me to stay on the right side of strong moves.
- I trade in the direction of the markets current trend so the odds are on my side of being right.
- I buy the strongest stocks and sell short the weakest stocks.
- When I am wrong I do not hope for luck I just get out of a losing trade.
- When I buy options I buy the in the money options with the odds in my favor not the far out of the money ones that require some luck.
- I primarily buy options instead of selling them so I can get big moves for small fees instead of small fees for big risks.
- I only risk 1% of my capital per trade so I do not blow up my account with a string of bad trades.
- I trade with confidence in my myself and my method not hoping for luck.
15 Common Sense Rules For Traders
1. No matter what you read about trading, until you use an approach and test it with your money on the line you will never learn how to trade. Paper Trading is NOT Trading!
2. If it were really possible to “Buy Low Sell High” or “Cut your Losses and Let your Winners Run”, then almost everyone would be making money rather than losing it.
3. Remember that there is ALWAYS someone on the other side of your trade who is using a trading technique exactly the opposite of yours who hopes to make money with his system.
4. If 90% of all traders lose money, they must be following generally accepted trading rules. The 10% who win do not!
5. You trade your beliefs and your beliefs about your system. If you have a problem with yourself, fix yourself first.
6. Impatience, Fear and Greed will make you poor. Any need to trade is rooted in greed and impatience.
7. If you really understand the markets then YOU KNOW that there is the same opportunity on every time frame, in every market, every single day.
8. Waiting for the perfect trade is “chickening out”, and caused by your lack of faith in yourself or your system.
9. Any hardwired, automated trading system sold that truly works 70 or 80 or 90 percent of the time in every market would be worth hundreds of millions of dollars and would not be for sale at any price.
10. Asking “How small an account do I need to begin trading” is asking to be wiped out.
11. Having a series of winning trades early can be more hazardous to your account than a series of small losses.
12. Learn to trade before you trade. If you win or lose without understanding why, you will never develop a winning strategy.
13. Ninety five percent of everything you hear from everyone about the markets and the markets “reasons” for doing what it did or will do are lies. Neither you nor anyone can predict the future. You can only make educated guesses about potentialities.
14. Asking someone (such as using a service) for advice on where the market is going is a sign you should be on the sidelines until you understand the market better. If the upcoming market direction is not obvious to you, you should not be risking your money. You will lose often enough even when you are right.
15. There is NO GUARANTEED way of making money in the Markets or anywhere else. NONE, NADA, ZIP, ZERO! All you can do is increase your knowledge about yourself and how to estimate the probability of placing a winning trade. Then trade by taking controlled and measured risks.
Way of the Turtle – Curtis Faith
How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise?
Replace fear with faith—faith in your trading model and trading plan
Replace confusion with the attitude of being comfortable with uncertainty
Replace hesitation with decisive action
Replace surprise with taking nothing for granted and preparing yourself for anything.
Oscar Wilde: The Picture of Dorian Gray
“‘What of Art?’ she asked.
‘It is a malady.’
‘Love?’
‘An illusion.’
‘Religion?’
‘The fashionable substitute for Belief.’
‘You are a sceptic.’
‘Never! Scepticism is the beginning of Faith.’
‘What are you?’
‘To define is to limit.’”
Planning, Discipline & Patience.
- Predicting rain does n’t count; building arks does’: Warren Buffett’s Noah Rule.
- “To know and not to do, is not yet to know” – Courtesy of Tom Witters.
- ‘It’s easy to have faith in yourself and have discipline when you’re a winner, when you’re number one. What you got to have is faith and discipline when you’re not a winner.’ – Vince Lombardi
- ‘After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!’ – Jesse Livermore
Trading: Doing the Homework
Many new traders fail in the stock market simply because they rush in without putting in the proper time and discipline in doing their homework. Trading is a professional endeavor much like any other career, you will only get out of it what you put into it. There is no easy money, you will have to earn it by out witting, out playing, and out smarting the majority of other market participants.
You need to learn ten things to be a successful trader:
- How to manager your risk per trade.
- What systems and methods really make money over the long term.
- What system fits your personality and beliefs about the market.
- How much heat you can you handle. How big can you trade with out emotions taking over?
- You must learn how the market actually works, trends, flows, and functions.
- Learn to focus only on what makes money in the market, everything else is noise.
- Discover who the greatest traders of all time were and study how they operated.
- Find out what the best books on trading are and read them.
- Study the charts of the stocks you are trading to understand how it works with trends, support, resistance, and moving averages.
- Practice paper trading, simulated accounts, and trading small positions of real money until you have mastered your trading plan. (more…)
‘Alexander Elder Quotes’
Trading is not all about just stock picking, it is not just about a winning system. Yes, first you have to understand how to trade and put the odds in your favor of winning, but that is not enough. You must also add in risk management so when you lose ten times in a row your trading career and account does not end there. You also must have faith in your system and method to be able to keep trading it even when you are losing, and you will have losing months, maybe even a losing year, can you keep going to be around for the big wins?
One dimensional traders just pick stocks, if they are right they win for a while, but eventually they do not stop out when they are wrong and they blow up their account. They also eventually get emotionally frustrated from wild equity swings and they eventually quit and blame the market.
Two dimensional traders have a good system and cut their losses but have trouble with self confidence and belief in their system. They tend to blame themselves when their accounts draw down 10% to 20% and have trouble understanding that it is just part of the game. The market environment is determining wins and losses not the trader, they don’t understand this. All they can do is take their entries and exits as they come and let the market do what it does. They have not separated themselves from their trading.
The three dimensional trader takes entries and exits based on his methodology that he believes in, he manages risk per trade carefully and never loses more than 1% t0 2% of his capital on any one trade. The 3D trader’s self worth and confidence is not tied up in any one trade, or monthly performance he understands this is a long term process with ups and downs. Wins and losses do not change his mindset. It is just a business, stocks are just inventory, the market gives and the market takes away, and he just takes what it is giving.
Traders need 3 Keys
#1 Trading is not about winning percentage, being right all the time, or predicting the future. What it is about is having bigger winners than losers. If you are profitable after each long string of trades then you are a winning trader in that time frame. You can make money through winning percentage as long as you keep losers small and you can make money through huge wins even with lots of losses. The key is not how many times you are right but the size of your winners versus your losers. That is the magic elixir of profitability.
#2 Trading is first and foremost about surviving, the vast majority of traders not only don’t make money but they lose most of their trading capital. The only way to have a long profitable trading career is to manage risk and survive a string of losses. If your trading losses are more than 1% to 2% of total trading capital per losing trade you are in danger of blowing up your account with a string of losing trades or one big loss. To make the journey from new trader to successful trader you have to survive losing streaks and completely unexpected market action. Trading and betting big will eventually take you out of the game, it is only a question of when.
#3 Trading is one of the roughest things a person can do mentally and emotionally. Even if you win in the markets you have to keep up a large amount of personal human capital in perseverance, passion, dedication, focus, and faith in self and system. If you are missing one of these six psychological elements the odds will be against you. You have to cultivate your goals and drive into a vision of success that you are willing to pursue until you get it and pay the price as you go to have the prize you seek.