Excitement (and fear of missing an opportunity) often persuade us to enter the market before it is safe to do so. After a down-trend a number of rallies may fail before one eventually carries through. Likewise, the emotional high of a profitable trade may blind us to signs that the trend is reversing.
Wait for the right market conditions before trading. There are times when it is wise to stay out of the market and observe from the sidelines.
Have the courage of your convictions: Take steps to protect your profits when you see that a trend is weakening, but sit tight and don’t let fear of losing part of your profit cloud your judgment. There is a good chance that the trend will resume its upward climb.
Concentrate on the technical aspects rather than on the money. If your trades are technically correct, the profits will follow.
Stay emotionally detached from the market. Avoid getting caught up in the short-term excitement. Screen-watching is a tell-tale sign: if you continually check prices or stare at charts for hours it is a sign that you are unsure of your strategy and are likely to suffer losses.
Focus on the longer time frames and do not try to catch every short-term fluctuation. The most profitable trades are in catching the large trends. (more…)
Two emotions that plague the inexperienced trader are Anticipated Loss and Buyers Remorse.
Does your trading life go something like this? You see a trade line up, and suddenly a cramp in your solar plexus appears as you anticipate a possible loss. You put this down to simple fear and make an effort to mentally overcome this internal barricade so as to enter the trade. Acting quickly so as not to miss out, you swiftly enter the position and your trading platform indicates that you are filled. Now you are gripped by the sensation of buyers remorse – too late to back out now… A small voice in the back of your subconscious says “what have I done?”
To your great delight and surprise, the trade soon goes in your favour, and for a while you feel a warm fuzzy glow and give yourself a little compliment, but soon the old feeling returns in the form of a hot flush. Anticipated loss is back again as you worry about the market turning against you and taking away the profit you now have. (more…)
1) Always wants to be in the game .. more time means less money
2) Wants money quickly .. you can’t control the market
3) Finds it very inexact – which system – how much to risk – there are no hard and fast rules ..
using a positive expectancy system with a clear edge will work out over a period of time if risk is proportionate
4) Finds it boring to trade small
Since no trade is a sure thing and even with positive expectation, it is possible to have a string of 10 consecutive lossees. It is important to risk less to give probabilities a chance to work in your favour
5) Wants immediate gratification – can’t wait
You don’t control the market
6) Keeps looking for new indicators/systems – the sure system
There is no definiteness..
7) Keeps trying new indicators
Nothing works all the time
8) Keeps switching between different techniques – he wants the techniques to work 100% of the time
Nothing works all the time.. Instead stick with a few proven systems and trade them all the time
9) Very Adventurous
You are here to make money and not for thrills
10) Wants to make big money overnight.. Multiple positions – excess leverage
Since you can never be sure if the next trade is a winner or if the next 10 trades are losers, why would you want to risk too much (more…)
This is an absolutely brilliant interview that is full of insights for the market. The interviewee is one of the pilots aboard the Qantas Airbus A380 last month that had an extremely serious uncontained engine explosion shortly after take-off.
In the interview they cover – inter alia – such things as
– The importance of checklists
– Dealing with contradicting signals
– Over-riding systematic considerations in favour of discretionary controls
– Keeping your head during a major catastrophe which constantly shifts its dynamics and has a lot of what we might call negative gamma…rapidly developing, interacting, non-linear issues that can rapidly move beyond your ability to keep up with them
– The importance of training and professionalism
– The importance of excess redundancy and robustness
– The importance of improvisation – and the ability to keep a clear enough head in a panic to ensure your creativity can be brought to bear on the problem.
– Power of teamwork.
Best part are the pictures of the cockpit showing the checklists and procedures they are working through.
As it turns out, this incident was very much more serious than the media ever picked up on. What an amazing story. I’m sure all will benefit greatly from reading this. For myself, I will be referring to this interview many times. A banquet for a lifetime.
Hope it benefits you all as much as it did me. Also hoping Mr. Tucker weighs in with some insights!
Time for another excerpt post taken from “When to sell” from Justin Mamis. Probably my favourite author. Do yourself a favour. Buy all his books and read them. Repeat the process. The best education you can get. This will make you a better trader and will provide you with tremendous insight into how markets work and how to deal with all the psychological aspects of trading.
Justin Mamis: ‚When to Sell’ – Inside Strategies For Stock market Profits
Chapter 2: ‘Right is wrong’ pages 23-24
With experience, and with some grasp of what has consistently affected your judgment in the past, you should be able to determine at which times and under what conditions you function best…and when you should be extra-careful, or even stay away entirely. One important thing every professional knows, or ought to know since it is his business to know, is that he doesn’t have to play the game every single minute of every day. The advent of desktop machines and their ability to present right in your face what is actually happening every single minute of every day – and some with bells and whistles to call your attention to some petty and momentary thing that has just happened – has had its effect, though: the less experienced, the less disciplined, have become increasingly short-term oriented and excitable, more, in fact, akin to what we believed in the past that the public could be criticized for, of playing a game, of having a predilection for continually being in the market in one way or another. “Isn’t there one stock worth buying?” was a common question during the massive 1973-74 bear market, and still is. There is no rule that says you always have to have action; yet that is perhaps the most disastrous of all the common errors we’ve noticed. Rather than continually confronting the market on its own inscrutable terms, stop and ask yourself what you know, whether what you know is enough to act upon, and how you are relating to it. Maybe it is a period when the market’s personality conflicts with yours, or something in your extra-market life is hampering your ability to view stock action objectively, or, simply, perhaps it’s a time when the market’s course isn’t clear to anyone. Then it is best to step aside. You owe it to yourself to find out exactly how ready and able you are to play, because it’s yourself you end up playing against.
The Bank of England and European Central Bank will deliver their latest monetary policy decisions on Thursday.
No change is expected from either, but it should still mean that sterling and the euro come, at least briefly, into sharper focus.
It’s the single currency that has been doing better of late, boosted by the ECB’s implicit bond backstop and subsequent easing of eurozone tensions.
In July, it cost less than 78p to buy one euro. Now it’s more than 81p. (more…)
1. Overcome Fear. Fear clouds judgment.
2. Remain Flexible. Surprise outcomes may require a change of plan.
3. Take reasoned risks. Risk can be good if the odds are in your favour.
4. Prepare to be wrong. Plan in advance how to deal with unfavourable outcomes.
5. Actively seek reality. See the world as it is rather than as you want it to be.
6. Respond quickly to change. If your plan calls for some action in the face of unfavourable outcomes, don’t delay.
7. Focus on decisions, not outcomes. In the face of risk, good choices can have bad outcomes, and bad choices can have good outcomes.
From :Inside the Mind of the Turtles :Curtis M Faith
It makes it hard to make successful, opinion based trades.
You enter a trade on the basis that everyone is wrong, accepting scope for the crowd to get it even more wrong before waking up to reality. When the crowd does eventually realise the error of it’s ways, the price turns in your favour. However, it is extremely difficult to hold on to the trade and enjoy ‘being right’, because the crowd is always wrong, and if it is now moving in your favour, then you are also wrong, an equal fool.
This unhealthy skepticism leads to early culling of winners and ensures that one’s portfolio spend most of it’s time holding on to losing positions.
Here is some common advice that I see all the time, that if you follow it you will lose.
Don’t fall into the trap of accepting it or following it.
Here are 6 of my favorites:
1. Day trading is a low risk high reward way to trade
How many writers do you see talk about day trading and how successful they are at it?
How many of them can show a real time track record of profits over the long term?
This is simply the dumbest way to trade there is. (more…)
A big part of trading is a probability game. The market can move any directions and many times against all logic and fundamentals for a period of time.
An edge in trading is the ability to have winning probabilities on your side.
Most people cannot distinguish between luck and skill when it comes to forecasting the market. At the best, I am right 70% of the time on fundamentals, 50% on the timing of the trade but I am making money on >80% of the trades.
I acknowledge I do not know how to predict the market timing with certainty. The process of trading is replete with errors and thus one has to cater for it.
Apparent randomness in the market is so complex that it cannot be managed with my finite mind.
So here are some ways that help me to handle the random behaviour of the market: (more…)