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Eleven Rules

  
  Education
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Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.

Rule #8
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.

Rule #9
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.

Rule #10
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.

Rule #11
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.

11 Rules For Better Trading

  
  Education
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Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment. (more…)

Anxiety and future in the Traders life

  
  Education
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anxiety-disorderAnxiety is a future oriented emotion. You never will get anxious about events that have already occurred. Suppose we had been anxious about a trade but now it’s over with profit hit or stopped out. We no longer feel anxiety – only feel nothing, or satisfaction, or remorse, or disappointment, or sorrow, or some other past oriented emotion.

Anxiety communicate a message that there’s something in our future for which we need to prepare. This is a vital, a self-protection message. (more…)

3 Books

  
  Education
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Last week , I plucked two behavioral finance books out of airport bookstores. Apparently Blink has triggered a new title and jacket aesthetic, as both of these books look as if they could have been companion volumes.

The quickest read of the bunch, Sway: The Irresistable Pull of Irrational Behavior (Ori Brafman and Rom Brafman), can easily be polished off in a three-hour flight. Frankly, this is the book’s main attraction, but also its weakness. Here is an entertaining read that provides a vignette-centric approach to illuminating the decision-making shortfalls humans are prone to making. Theories and conclusions are loosely woven around the vignettes to provide structure and coherence, yet most of these are self-explanatory from the examples. Sway has the readability of Freakonomics and is just as likely to be consumed in one sitting, but ultimately does little more than whet the appetite for anyone with an interest in getting to the full menu of behavioral finance. As an hors d’oeuvre, however, it is most enjoyable.

At first glance, Nudge: Improving Decisions About Health, Wealth and Happiness (Richard Thaler and Cass Sunstein), looks to be an only slightly heartier meal. In fact, Nudge retains the readability of Sway, but is much more comprehensive, better organized and yet has the heft of an academic introduction to behavioral finance. Nudge will probably require an overseas flight to digest, and is better suited for savoring over the course of multiple sittings.

In another league entirely is the encyclopedic Choices, Values, and Frames (Daniel Kahneman and Amos Tversky), which is a comprehensive collection of articles that represent the definitive thinking on much of the field of behavioral finance, which Kahneman and Tversky were instrumental in establishing. One could argue that Choices, Values, and Frames was the book which was largely responsible for Kahneman being awarded the Nobel Prize following Tversky’s death. This book is a densely packed buffet of ideas that is probably best consumed in small chunks over the course of weeks or months. It is not necessarily an easy read, but the ideas and research that went into it and the reflection and rethinking of the investment world that come out of it make it one of the most influential books in the realm of finance and investments.

Eleven Rules for Traders

  
  Education
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Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies. (more…)

11 Trading Rules

  
  Education
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Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.

Rule #8
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.

Rule #9
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.

Rule #10
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.

Rule #11
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.

Fear and Greed

  
  Education
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Day trading is a system based on rules, but as charts are analyzed and prices fluctuate, traders may find that they have a difficult time sticking to those rules when fear or greed become involved in the analysis. Successful traders are able to buy despite feelings of fear and sell despite feelings of wanting to prolong the holding of a stock.

A confident trader will still take the time to test and re-test a stock. At first glance a stock might look like it’s in top shape and performing as expected, but a successful trader will not solely rely on first glance appearances. Those who day trade stocks know that in an instant the market can change and it’s important to stay abreast of company information as well as market news and conditions. A successful trader will stick to the rules set up in day trading systems to ensure that his or her reactions remain unbiased throughout the trade.

Effective day trading strategies focus on providing consistent and disciplined actions. Successful traders have a consistent approach to the market and trading. They will take the time to systematically build up their own trading system that takes into account their own personal elements of risk control and they will take the time to stick to their original trading plan. It’s not that traders shouldn’t make changes based on market information, but that the changes made should be based on established trading rules that help traders determine what their entry and exit points on a trade should be.

Some of the best day trading tips that a trader can get help them deal with fear and greed. Many traders find that they may be able to memorize the rules and familiarize themselves with knowing how to accurately interpret stock charts, but they also need to learn how to prepare themselves to deal with fear and greed.

Fear in trading primarily takes on two basic forms – the fear of loss and the fear of missing out. The fear of loss leads to selling stocks prematurely and as a result, they aren’t able to capitalize and recover fully on the trade. When they start to enter into trades, the trade isn’t given enough time to mature and the trader sells so that more isn’t risked.

The fear of missing out is another form of fear that compels people to abandon their rules so that they don’t lose out on another major stock move. These fears need to be dealt with because they will impact a trader’s entry and exit decisions.

Greed is the motivation for over-confidence. Dreams of “making it big” in trading can cloud a trader’s perspective. Again, they abandon the rules of their trading system in the hopes that more money will come their way. Traders need to learn how to deal with greed so they can maintain their focus and not have their thoughts be swept away with illusions.

My 11 Trading Rules

  
  Education
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Trading in the markets is a process, and there is always room for self improvement. Here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle
room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings.
But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1. (more…)

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