Ambitious
Makes and follows long term business plan
•Unambitious
Will ignore long term business plan
•Calm
Will handle times of market volatility and make smart decisions
•Worrying
Will panic when markets are volatile and make stupid decisions (more…)
If you ever read any book on trading you would notice that every author our there talking about three most important things of successful trading and investing are:
Depending on the book one is reading one of those three are emphasized more or less. If you read book on technical analysis author will say that having edge is most important, and even if you have PhD in psychology if you don’t have proper edge you will not be able to make money.
If you read book on psychology again author will tell you that you can have best trading system on the world if you are not able to take signals you will not be successful trader and that you must make system that will suit your personality.
Finally if you read book on money management, author will tell you that even if you have best system in the world and having best discipline in the world if you risk too much of your capital on each trade you will probably ruin your account and the game will be over.
To answer I would ask you following: What is more important heart or brain? Eyes or ears? Legs or Arms?
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All questions that need to be answered if you are to have confidence in your trading system. For it is confidence that allows you to profit from the markets.
Ridiculous notion? Perhaps. But true nonetheless.
You see, despite our civilized veneer, we are still animals that react to fear, the most powerful of emotions. And it is fear that supercedes our thoughts when we trade.
To circumvent fear, you should develop trading plans, trade according to plan, and analyze your trades in a trading journal. As do this, you will build a database that will create statistical patterns of your trades. This can be studied and help you to predict the outcome of future trades. (more…)
“Observation # 1: The greatest number of losing traders is found in the short-term and intraday ranks. This has less to do with the time frame and more to do with the fact that many of these traders lack proper preparation and a well thought-out game plan. By trading in the time frame most unforgiving of even minute error and most vulnerable to floor manipulation and general costs of trading, losses due to lack of knowledge and lack of preparedness are exponential. These traders are often undercapitalized as well. Winning traders often trade in mid-term to long-term time frames. Often they carry greater initial levels of equity as well.” Walter Downs
“The ability of banks to issue claims far in excess of their reserve position is essentially regulated counterfeiting when those claims have little or no chance of being satisfied, and it is an inherently cyclical and destabilizing process. The Fed, as US banks’ chief regulator, has not only condoned this imprudent, unsustainable (and Constitutionally-dubious) activity, it has encouraged and abetted it.” Paul Brodsky and Lee Quaintance
“He did not publish or spread any information that was false. Instead he praised the companies he had invested in to the skies, including the spreading of rumors. Does his action fall into information-based manipulation because of this? The answer is: partly. From the total gain of USD 800,000 he had to repay USD 285,000, so just over a third of the total gain.” Mark Schindler
“Runs occur when a group of traders create activity or rumors in order to drive the price of a security up.” Unknown (more…)
1. They all have a tested, positive expectancy system that’s proved to make money for the market type for which it was designed.
2. They all have systems that fit them and their beliefs. They understand that they make money with their systems because their systems fit them.
3. They totally understand the concepts they are trading and how those concepts generate low-risk ideas
. 4. They all understand that when they get into a trade, they must have some idea of when they are wrong and will bail out
. 5. They all evaluate the ratio of reward to risk in each trade they take. For mechanical traders, this is part of their system. For discretionary traders, this is part of their evaluation before they take the trade.
6. They all have a business plan to guide their trading. You must treat your trading like any other business
7. They all use position sizing. They have clear objectives written out, something that most traders/investors do not have. They also understand that position sizing is the key to meeting those objectives and have worked out a position sizing algorithm to meet those objectives.
8. They all understand that performance is a function of personal psychology and spend a lot of time working on themselves. You must become an efficient rather than inefficient decision maker.
9. They take total responsibility for the results they get. They don’t blame someone else or something else. They don’t justify their results. They don’t feel guilty or ashamed about their results. They simply assume that they created them and that they can create better results by eliminating mistakes.
10. They understand that not following their system and business plan rules is a mistake. If you make even one mistake per month, you can turn a profitable system into a disaster. Thus, the key to becoming efficient is to eliminate such mistakes.
What elements from the above list do you need to work on more than any other? Yes, take a moment to think about this today. As you set your top priorities for this new second quarter, I recommend focusing on just one of these elements by outlining specific steps you need to take this quarter to improve. For some, this will require further study. For others, it only requires just some minor behavior modification, refocus and attitude adjustment. Many times the difference between being great and mediocre
