Archives of “futures contract” tag

rss

W. D. GANN’S 24 TIMELESS STOCK TRADING RULES

  
Analysis, Education
#  #  #  #

Here are the 24 rules:

1. Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one-tenth of your capital on any one trade.

2. Use stop loss orders. Always protect a trade.

3. Never overtrade. This would be violating your capital rules.

4. Never let a profit run into a loss. After you once have a profit raise your stop loss order so that you will have no loss of capital.

5. Do not buck the trend. Never buy or sell if you are not sure of the trend according to your charts and rules.

6. When in doubt, get out and don’t get in when in doubt.

7. Trade only in active markets. Keep out of slow, dead ones.

8. Equal distribution of risk. Trade in two or three different commodities if possible. Avoid tying up all your capital in any one commodity.

9. Never limit your orders or fix a buying or selling price.

10. Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits.

11. Accumulate a surplus. After you have made a series of successful trades, put some money into a surplus account to be used only in emergency or in times of panic. (more…)

Overcoming the Fear of Loss in Trading

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

The fear of “pulling the trigger” stems mainly from the fear of loss. That same fear is responsible for 3 major actions or inactions that destroy traders:

  1. Cutting winners short. You take what you can and fear that if you don’t grab whatever small gains you have now, they would disappear.
  2. Keeping losers. You don’t dare to actualize your losses and hope that the trade will turn around.
  3. Unable to take every valid trade setup. You don’t dare to pull the trigger because you have associated the intense negative emotions of losing or the possibility of losing with being in a trade, so you escape from experiencing those feelings by not entering into a trade.

Psychology was never an issue when I was swing trading stocks, but has now become a major stumbling block when I am trading intraday futures. Hence I have just started to look into this.

All three psychologists mentioned the need to trade small. Other advice include doing visualization exercises, mindfulness exercises, and looking at the bigger picture.

I also found two resources with mindfulness training and a related webinar, links below.

Dr Brett Steenbarger

  • If it is due to lack of confidence in the system, back test and/or paper trade the system.
  • If it is due to fear of loss (Steenbarger calls it performance anxiety), do visualization exercises where you picture yourself in the stressful situation but doing the right thing and keeping yourself in the right frame of mind. Also paper trade and trade small. (more…)

Traders Must Follow These Rules

  
  Education
#  #  #  #  #  #  #

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…)

12 Signs You’re in a Bad Trade

  
  Education
#  #  #  #  #  #  #
  1. Your entry is based on your opinion not a valid signal.
  2. Your bet is that a trend will change with no reason behind the bet.
  3. You are entering out of greed after a big move.
  4. If you are wrong about the trade you will suffer a huge loss.
  5. You enter a trade with no stop loss.
  6. You enter a trade with no exit strategy to bank any profits.
  7. You enter based on someone’s opinion.
  8. You enter a trade because you are bored.
  9. You are trading a market you have done zero back testing or chart studies on.
  10. You are trading futures or option contracts you do not understand.
  11. You are trading with confidence even though you have zero confidence.
  12. You have no idea what the hell you are doing.

15 Steps Must For Traders

  
  Education
#  #  #  #  #  #  #  #
  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…)

W. D. GANN’S 24 TIMELESS STOCK TRADING RULES

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #

1. Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one-tenth of your capital on any one trade.
2. Use stop loss orders. Always protect a trade.
3. Never overtrade. This would be violating your capital rules.
4. Never let a profit run into a loss. After you once have a profit raise your stop loss order so that you will have no loss of capital.
5. Do not buck the trend. Never buy or sell if you are not sure of the trend according to your charts and rules.
6. When in doubt, get out and don’t get in when in doubt.
7. Trade only in active markets. Keep out of slow, dead ones.
8. Equal distribution of risk. Trade in two or three different commodities if possible. Avoid tying up all your capital in any one commodity.
9. Never limit your orders or fix a buying or selling price.
10. Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits.
11. Accumulate a surplus. After you have made a series of successful trades, put some money into a surplus account to be used only in emergency or in times of panic.
12. Never buy or sell just to get a scalping profit.
13. Never average a loss. This is one of the worst mistakes a trader can make.
14. Never get out of the market just because you have lost patience or get into the market because you are anxious from waiting.
15. Avoid taking small profits and big losses.
16. Never cancel a stop loss order after you have placed it at the time you make a trade.
17. Avoid getting in and out of the market too often.
18. Be just as willing to sell short as you are to buy. Let your object be to keep with the trend and make money.
19. Never buy just because the price of a commodity is low or sell short just because the price is high.
20. Be careful about pyramiding at the wrong time. Wait until the commodity is very active and has crossed resistance levels before buying more, and until it has broken out of the zone of distribution before selling more.
21. Select the commodities that show strong uptrend to pyramid on the buying side and the ones that show definite downtrend to sell short.
22. Never hedge. If you are long one commodity and it starts to go down, do not sell another commodity short to hedge it. Get out at the market: Take your loss and wait for another opportunity.
23. Never change your position in the market without a good reason. When you make a trade, let it be for some good reason, or according to some definite rule; then do not get out without a definite indication of a change in trend.
24. Avoid increasing your trading after a long period of success or a period of profitable trades.

10 Greedy Characteristics

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

1.  You find yourself forgetting your rules.  Which during day trading is the last thing you want to happen since your profit margins are often based on smaller movements.

2.  When reviewing your pre-market plays, every stock looks like a winner.

3.  Shortly after opening your position you see a price target that is much higher but you have no justification for the target.

4.  Trading feels stressful all of the time.  From the minute you get up in the morning, until you close your last position.  Instead of approaching trading with a calm head, you have a constant feeling of fighting and living on the edge.

5.  You stop reviewing your trades.  If someone were to ask your win/loss percentage over the last week you would have no idea; however, you would know how much money you need to make for the week.

6.  You abandon limit orders and start placing more and more trades at market.  Most of the times this will occur when you are trying to get into the position, because you can’t stand the idea of not being in on the winning trade.

7. You start to over trade.  If you normally put on 3 trades per day, you will now find yourself placing 6 or more trades per day.  This sort of behavior will run its course as the increase in trading activity while abandoning your day trading rules always points to losing money. (more…)

Speculation, Trading, and Bubbles-by José A. Scheinkman (Book Review )

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

SPECULATION-TRADING-BUBBLESTo pay tribute to one of its most famous graduates, Kenneth J. Arrow, Columbia University launched an annual lecture series dealing with topics to which Arrow made significant contributions—and there were many. Speculation, Trading, and Bubbles stems from the third lecture in the series given by José A. Scheinkman, with adapted transcripts of commentary by Patrick Bolton, Sanford J. Grossman, and Arrow himself. I’m going to confine myself here to a few excerpts that encapsulate some of the lecture’s key points, ignoring the often perceptive commentary.
Scheinkman offers a formal model of the economic foundations of stock market bubbles in an appendix to his lecture, but he lays out its basic ideas in the lecture proper. The model rests on two fundamental assumptions—“fluctuating heterogeneous beliefs among investors and the existence of an asymmetry between the cost of acquiring an asset and the cost of shorting that same asset. … Heterogeneous beliefs make possible the coexistence of optimists and pessimists in a market. The cost asymmetry between going long and going short on an asset implies that optimists’ views are expressed more fully than pessimists’ views in the market, and thus even when opinions are on average unbiased, prices are biased upwards. Finally, fluctuating beliefs give even the most optimistic the hope that, in the future, an even more optimistic buyer may appear. Thus a buyer would be willing to pay more than the discounted value she attributes to an asset’s future payoffs, because the ownership of the asset gives her the option to resell the asset to a future optimist.” (pp. 15-16)

(more…)

John S. Wasik,Keynes’s Way to Wealth-Book Review

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

John Maynard Keynes was not only a renowned economist, he was an investor. He managed his own money as well as that of King’s College, his friends and family, and insurance companies. As John C. Bogle writes in his introduction to the book, “His spectacular success showed not only his passion for making money, but his growing aversion to losing it. As someone who had gained two fortunes through his trading prowess and lost them through his hubris, Keynes is a stellar example of how an investor can learn, fall on his face more than once, and still come out ahead.” (p. xxxiv)

John S. Wasik explores this investing journey in Keynes’s Way to Wealth: Timeless Investment Lessons from the Great Economist(McGraw-Hill, 2014). Let me start with the rewards of the journey: what Keynes did with his wealth. He bought art as well as rare books and manuscripts. The Keynes collection of rare books, bequeathed to King’s College in 1946, is, according to the college’s web site, “especially strong in editions of Hume, Newton and Locke, and in sixteenth and seventeenth century literature. About 1300 books in this collection have been catalogued on the online catalogue. … Keynes’s collection of manuscripts by Newton, Bentham, John Stuart Mill, etc., is housed in the Modern Archive Centre.” A man after my own heart, but with a bigger budget.

Keynes was a speculator. According to his own definition, “The essential characteristic of speculation … is superior knowledge. We do not mean by this the investment’s actual future yield … we mean the expected probability of the yield. The probability depends upon the degree of knowledge in a sense, therefore it’s subjective. If we regard speculation as a reasoned effort to gauge the future from present known data, it may be said to form the reins of all intelligent investing.” (p. 8) (more…)

You Should Have All 4 Elements To Be Successful

  
  Education
#  #  #  #  #  #  #  #

Trading is a very complex undertaking and if you miss one element you will likely eventually fail  in this endeavor.

Here are the four different elements we must have working for us for success in trading:

The Knowledge

If we don’t do the homework to know what we need to know we will fail due to ignorance. Understanding historical price action, reading books by and about the best traders, seminars, mentor-ships, and  systems testing is all part of the homework we must do to get the needed knowledge.

The Resources

While trading with a small account is a good place to start it is not a good place to stay. Traders must be adequately capitalized for meaningful trading. We must have an affordable broker that does not charge bloated commissions and gives great execution on orders. A trader must have a platform and charting service that is adequate for his trading style. Trading a small account with an expensive broker with poor execution is a path to eventual failure.

The Desire (more…)

Go to top