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Read these 12 Books to become A Better Trader/Investor

1. The Talent Code by Dan Coyle.  There are four ingredients for being good at anything, thus trading.  Domain knowledge, critical feedback, sustained energy, and purposeful practice.  Train with these ingredients to find trading success.  

2. Golf if Not a Game of Perfect by Bob Rotella.  Confidence trading a $GOOG or $SPY is something built and essential.  This book, written by a top sports golf psychologist, helps you learn to build real confidence.  

3. The Daily Trading Coach, by Dr. Brett Steenbarger.  Dr. Steenbarger is the Coach K of coaching in the trading world.  

4. Bounce by Matthew Syed.  This book studies why a small cluster of young lads in England became the best table tennis players in the world.  This read emphasizes the importance of great coaching for elite performance.  

5. Drive by Daniel Pink.  When we were young our parents preached, “Find something you love and do it.  The rest will take care of itself.”  Dan offers a better thought, “Do what you do.”  If you are not trading, then how can you really love trading?  In today’s world the barrier for entry into trading is almost nothing.  Paper trade, open a small account, back-test.  But you should be trading if you love trading.  Do what you do!
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Traders Should Control These 14 Emotions

14-POINTS
 

Anger- Revenge trading

Fear- Inability to take an entry or hold a winner in a trend.

Disgust- Can lead to loss of a traders confidence.

Happiness- Surprisingly can lead to trading too big and taking on too many positions.

Sadness- Can lead to having difficulty taking the next trade entry or cutting a loss.

Surprise- Can many times lead to making decisions based on emotions and abandoning a trading plan. (more…)

15 Points For Traders

1. Don’t be a tradeaholic
Agreed
2. You trade to make money – not for fun, games, or to escape boredom
Definitely
3. Never add to a bad trade
If you have a specific strategy which includes adding to a trade which has gone against you, that’s one thing. Just “averaging down” is usually a bad play.
4. Once you have a profit on a trade, never let it turn into a loss
This can be a really good plan for psychology purposes, but it may or may not be appropriate for the type of strategy/system you employ.
5. No hoping, no wishing, no would’ve, no opinions, no should’ve
It’s hard not to second-guess, and reviewing thinking after the fact is part of the learning process, but never do it in trade.
6. Don’t be a one way trader – be flexible, opportunities on both sides
More opportunities doesn’t necessarily mean better trading. Some systems, markets, and/or traders are just better one-way only.
7. Know your risk on each trade. Trade with stops to limit losses
Definitely yes on the first part. The second part is up for debate in some ways.
8. Look for 3-1 profit objective trade
Totally disagree. This can’t be taken in isolation. You can have fantastic results with a smaller R/R ratio. It depends on your system’s or method’s win %.
9. When initiating a trade, always get your price (use a limit order)
Depends on your system. (more…)

10 Ways to Move From Peril to Profits

  1. The first question to ask in any option trade is how much of my capital could I lose in the worst case scenario not how much can I make.
  2. Long options are tools that can be used to create asymmetric trades with a built in downside and unlimited upside.
  3. Short options should only be sold when the probabilities are deeply in your favor that they will expire worthless, also a small hedge can pay for itself in the long run.
  4. Understand that in long options you have to overcome the time priced into the premium to be profitable even if you are right on the direction of the move.
  5. Long  weekly deep-in-the-money options can be used like stock with much less out lay of capital.
  6. The reason that deeper in the money options have so little time and volatility priced in is becasue you are ensuring someones profits in that stock. That is where the risk is:intrinsic value, and that risk is on the buyer.
  7. When you buy out-of-the-money options understand that you must be right about direction, time period of move, and amount of move to make money. Also understand this is already priced in.
  8. When trading a high volatility event that price move will be priced into the option, after the event the option price will remove that volatility value and the option value will collapse. You can only make money through those events with options if the increase in intrinsic value increases enough to replace the vega value that comes out.
  9. Only trade in options with high volume so you do not lose a large amount of money on the bid/ask spread when entering and exiting trades.
  10. When used correctly options can be tools for managing risk, used incorrectly they can blow up your account. I suggest never risking more than 1% of your trading capital on any one option trade.

 

Traders Must Follow These Rules

More important than any entry system….Money management and trading psychology are much important

Keep Losses Small…

Trade with stops

Trade in the direction of the trend

Doubling down is a sure way to lose money and blow up

Trade with a complete plan knowing exactly what to buy/sell…how much to buy/sell and know exactly when the trade does not work… (more…)

15 Steps Must For Traders

  1. Commit to doing the work to become a successful trader.
  2. Study the top resources for trading success.
  3. Decide what level of annual returns you want to make on average.
  4. Decide the maximum capital draw down level you can tolerate and accept.
  5. Become a reactive trader not a predictive trader, learn how to trade price action.
  6. Focus on a system with a winning risk/reward ratio. Bigger winning trades than losing trades.
  7. Build and back test a trading methodology that is profitable over many different market environments and meets your requirements.
  8. Write a trading plan that quantifies entries, exits, positions sizing, and your rules.
  9. If you have the personalty to trade this system and plan with real money then proceed.
  10. Eliminate the risk of ruin by never losing more than 1% of trading capital on any one trade.  (more…)

10 Laws of Stock Market Bubbles

  1. Debt is cheap.
  2. Debt is plentiful.
  3. There is the egregious use of debt.
  4. A new marginal (and sizeable) buyer of an asset class appears.
  5. After a sustained advance in an asset class’s price, the prior four factors lead to new-era thinking that cycles have been eradicated/eliminated and that a long boom in value lies ahead.
  6. The distance of valuations from earnings is directly proportional to the degree of bubbliness.
  7. The newer the valuation methodology in vogue the greater the degree of bubbliness.
  8. Bad valuation methodologies drive out good valuation methodologies.
  9. When everyone thinks central bankers, money managers, corporate managers, politicians or any other group are the smartest guys in the room, you are in a bubble.
  10. Rapid growth of a new financial product that is not understood. (e.g., derivatives, what Warren Buffett termed “financial weapons of mass destruction”).

According To Psychologists : 20 Facts -Why Traders Lose Money in Market ?

  1. Men trade more than women. And unmarried men trade more than married men. 5
  2. Poor, young men, who live in urban areas and belong to specific minority groups invest more in stocks with lottery-type features. 5
  3. Within each income group, gamblers under perform non-gamblers. 4
  4. Investors tend to sell winning investments while holding on to their losing investments. 6
  5. Trading in Taiwan dropped by about 25% when a lottery was introduced in April 2002. 7
  6. During periods with unusually large lottery jackpot, individual investor trading declines. 8
  7. Investors are more likely to repurchase a stock that they previously sold for a profit than one previously sold for a loss. 9
  8. An increase in search frequency [in a specific instrument] predicts higher returns in the following two weeks. 10
  9. Individual investors trade more actively when their most recent trades were successful.11
  10. Traders don’t learn about trading. “Trading to learn” is no more rational or profitable than playing roulette to learn for the individual investor.

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Warren Buffett Nails It On The Importance Of Luck In Life

WARREN BUFFETT: Well I came up with that a long, long time ago to describe the situation that – I was lucky. I was born in the United States. The odds were 30 or 40-to-1 against that. I had some lucky genes. I was born at the right time. If I’d been born thousands of years ago I’d be some animal’s lunch because I can’t run very fast or climb trees. So there’s so much chance in how we enter the world. And –

LIU: And you were always aware to make sure your children and their grandchildren, and your grandchildren would be grounded.

WARREN BUFFETT: Yes. And we’re not – how you came out of the womb has really nothing to do with what kind of person you are. You decide what kind of person you’re going to be. It does decide whether maybe you never have to do an item of work in your life and maybe determine whether you’re fighting uphill all of the time, but where in my life, in my eyes is we’re all created equal, and but we don’t all have an equal opportunity by a longshot. And my kids really work every day in trying to even up the scorecard.

Luck plays a big role in life.  But you also get to choose how you’re going to use that luck and whether you want to try to make more of your own luck.