Archives of “financial markets” tag

rss

10 Trading Principles of George Soros

  
  Education
#  #  #  #  #  #  #

george_soros“I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”

Understanding that he was not always right enabled him to cut losses short and position size right.

“My approach works not by making valid predictions but by allowing me to correct false ones.”

Soros’ is flexible in his trades, he changes his mind and reverses positions when needed. He does not marry his trades.

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

George Soros knows that the key to profitability for him is more about big wins and small losses than his winning percentage. 

“The markets are always on the side of exuberance or fear. It’s fear and greed. Right now greed has the better of it, which is rather nice (for investors) as long as it doesn’t get out of hand,”

Market trends are caused more by the extremes of  investors emotions than fundamental reasons. (more…)

10 Types of Trading Animals:Which Are You?

  
  Education
#  #  #  #  #  #  #  #

The Bear- This trading animal believes the market will be going down and plays the short side. Bears think that a market is going to be very red.

The Bull- This trading animal is very optimistic that the market will be green. Bulls love to buy and believe their screen will be full of green.

The Whale- This trading animal can move prices when it buys and sells. The whale has to faze into positions and out of them so it does not make big enough waves to attract piggy backers. A lot of money can be made trading along side the right whale.

The Pig- This trading animal likes to trade big and often. The problem is that the pig does not know how to exit a winning trade he usually has too big of a target, too big of a position size, and too big of a time frame.

The Shark- This trading animal is just about making money, it gets into trades, makes money and gets out. It has little interest in big complicated theories or esoteric methods. The shark keeps it simple it makes money then moves on to the next opportunity. (more…)

Every mistake a trader can make

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #

MISTAKES-TRADERSSymptoms:

  1. Trading with “scared” money

  2. Trading from a state of desperation and fear
  3. Ruled by emotions and unable to take a loss
  4. Changing her trading plan often
  5. Trying to be perfect
  6. Looking for medication to deal with emotional issues over trading
  7. Adopting a trading technique (scalping one futures contract) that is beyond her level of trading competence
  8. Attached to the outcome of each trade
  9. Not committed to the process of learning to trade—using trading as a temporary “stop-gap” source of income until something else becomes available.

  10. Acting out personal dramas in the financial markets

10 Tips For Managing Trader Stress

  
  Education
#  #  #  #  #  #  #  #  #  #  #

Traders should never underestimate the role that stress plays in their trading. Many more will succeed or fail based on their ability to handle stress than will have their winning and losing determined by a robust method, mentor, or risk management. It is even possible for a trader to win consistently and still not be able to win in the long term due to the fact that they can not get comfortable being uncomfortable with capital on the line with an unknown outcome. Others will simply burn themselves out stressing excessively while losing and also stressing when they win scared they will give back their profits. If you are  going to be a successful trader you will need to manage the weakest link in any trading system: the trader. Stress management is the traders weakest spot. You have to be able to handle the heat of trading so you don’t melt.

 Here are the ten ways to manage your stress in trading:

1). When you get over excited calm down by concentrating on your breath.
2). Never trade so big that one trade will make or break your account, trading career, or lifestyle. 
3). Only trade systems and methods that you fully understand and have faith in for profitable in the long term.
4). Visualize yourself being a success as a trader.
5). Slow down your trading to a pace that does not rattle your nerves. 
6). Connect with like minded traders that understand your battles and goals.
7). Study and do so much homework about trading that you begin to have unshakable confidence in yourself. 
8). Stop doing what does not work in your trading and start doing more of what does work for you and makes you money.
9). Do not let others shake your confidence, do not accept any unsolicited advice from anyone, stick to your game plan. 
10). Accept your losses quickly when stops are hit to avoid emotional damage and stress from big losses.

Do everything you can to prevent the damaging effects of stress on your trading and life. (more…)

25 Points -Before the Trade

  
  Education
#  #  #  #  #  #

1. Do you know the name and numbers of all your counterparts, especially if your equipment breaks down?

2. When does your market close, especially on holidays?

3. Do you have all the equipment you’ll need to make the trade, including pens, computers, notebooks, order slips, in the normal course and in the event of a breakdown?

4. Did you write down your trade and check it to see for example that you didn’t enter 400 contracts instead of the four that you meant to trade?

5. Why did you get into the trade?

6. Did you do a workout?

7. Was it statistically significant taking into account multiple comparisons and lookbacks?

8. Is there a prospective relation between statistical significance and predictivity?

9. Did you consider everchanging cycles?

10. And if you deigned to do a workout the way all turf handicappers do, did you take into account the within-day variability of prices, especially how this might affect your margin and being stopped out by your broker? (more…)

2 Questions & Answers For Traders

  
  Education
#  #  #  #

It is impossible to make money trading without an edge.

There are many ways to create an edge in the markets, but one this is true—it is very, very hard to do so. Most things that people say work in the market do not actually work. Treat claims of success and performance with healthy skepticism. I can tell you, based on my experience of nearly twenty years as a trader, most people who say they are making substantial profits are not. This is a very hard business.

Every edge we have is driven by an imbalance of buying and selling pressure.

The world divides into two large groups of traders and investors: fundamental traders who base decisions off of financial analysis, understanding of the industry and a company’s competitive position, growth rates, assessment of management, etc. Technical traders base decisions off of patterns in prices, volume or related data. From a technical perspective, every edge we have is generated by a disagreement between buyers and sellers. When they are in balance (equilibrium), market movements are random.

7 Warning Signs For Trader

  
  Education
#  #  #  #  #  #  #

There are warning signs that a trader is going down the road road in a trade or in their trading in general. Traders have to go with the flow of the market, manage risk, and keep their mind open to actual price action. Departing from these principles are dangerous and could result in huge draw downs in capital and even blowing up their accounts. Trading through the filters of fear, greed, or ego are very dangerous.

  1. You stop trading your plan and start “shooting from the hip” you are losing or winning so you believe that you are above your own rules, you start trading your opinions instead of your plan.
  2. You are about to take a trade you are 100% sure of, you have no doubt that it will work out. Trades that feel good to do and feel like can’t lose trades rarely win because everyone is already positioned in those trades.
  3. When you ignore your first stop and start deciding that you should give your trade “more room”, when you allow a loss to grow and rationalize why you should hold it instead of following your plan and stopping out you are in trouble.
  4. Averaging down in a position that is going against you is never a good idea, fighting trends are very dangerous amplifying your losses by increasing your position size can be fatal to your account.
  5. Fighting against the prevailing market trend over an over again can chop your account to pieces. (more…)

Lack of Discipline & Patience

  
  Education
#  #

When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week. (more…)

Diagnosing trading problems.

  
  Education
#  #  #  #  #  #  #  #  #

1) Problems of training and experience – Many traders put their money at risk well before they have developed their own trading styles based on the identification of an objective edge in the marketplace. They are not emotionally prepared to handle risk and reward, and they are not sufficiently steeped in markets to separate randomness from meaningful market patterns. They are like beginning golfers who decide to enter a competitive tournament. Their frustrations are the result of lack of preparation and experience. The answer to these problems is to develop a training program that helps you develop confidence and competence in identifying meaningful market patterns and acting upon those. Online trading rooms, where you can observe experienced traders apply their skills, are helpful for this purpose.
2) Problems of changing markets – When traders have had consistent success, but suddenly lose money with consistency, a reasonable hypothesis is that markets have changed and what once was an edge no longer is profitable. This happened to many momentum traders after the late 1990s bull market, and it also has been the case for many scalpers after volatility came out of the stock indices. Here the challenge is to remake one’s trading, either by retaining the core strategy and seeking other markets with opportunity or by finding new strategies for one’s market. The answer to these problems is to reduce your trading size and re-enter a learning curve to become acquainted with new markets and methods. Figuring out how you learned the markets initially will help you identify steps you need to take to relearn new patterns. 
3) Situational emotional problems – These are emotional stresses that are recent in origin and that interfere with decision making and performance. Some of these stresses might pertain to trading, such as frustration after a slump or loss. Some might stem from one’s personal life, as in a relationship breakup or increased financial pressures due to a new home or child. Very often these problems create performance anxieties by putting the making of money ahead of the placing of good trades. The answer to these problems is to seek out short-term counseling to help you gain perspective on the problems and cope with them effectively.  (more…)

JOHN KENNETH GALBRAITH ON STOCK MARKET MEMORY LOSS

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

Where else but in the markets can short term memory loss be both beneficial and profitable?

John Kenneth Galbraith, an economist, says the financial markets are characterized by…

“…extreme brevity of the financial memory.  In consequence, financial disaster is quickly forgotten.  In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world.  There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].

Go to top