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TRADING IS SIMPLE. IT’S JUST NOT EASY

  
  Education
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How could two phrases sound so similar, but yet be so different?

I think we need to look differences between the context of each phrase.

When I describe the idea of trading being simple, what I really mean is that itshould be effortless. The word effortless is defined by Merriam-Webster Dictionary as:

showing or requiring little or no effort <effortlesspower>

I believe that good traders are able to trade the markets effortlessly – it’s simple to them. But getting to the point of doing anything effortlessly is noteasy. In fact, it’s really hard. A good analogy would be describing an athletes ability to perform his or her skill. If we took two people – one being a person who runs two miles everyday versus a person who hasn’t ran for the past two months, who will have the easier time running one mile? The answer is simple of course. The person who runs everyday will be able to run one mile easily – it will be effortless to them. However, the person who hasn’t ran in two months will find it extremely hard to and likely have to take breaks in-between so that he or she can finish. (more…)

Timeless Trading Wisdom

  
  Education
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Trading wisdomTrading System –  The trading system gives the trader the ability to control his or her emotional states rather than allowing them to control him. A system is a disciplined method for organizing dynamic, ever-changing market phenomena.

Risk Control – If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

Psychological Makeup – You learn to distinguish the good traders from the bad, the successful techniques from the unsuccessful, and the good habits from the faulty. You also learn to distinguish the lover from the fighter, the winners from the losers, the serious from the frivolous, the cerebral from the superficial, and the friend from the foe. But above all, you learn that the psychological makeup of the trader is the single most critical element of success.

The Easy Middle – The beginning of a price move is usually hard to trade because you are not sure whether you are right about the direction of the trend. The end is hard because people start taking profits and the market gets very choppy. The middle of the move is what I call the easy part.

Cut Back Trading Size When Losing – When you are in a losing streak, your ability to properly assimilate and analyze information starts to become distorted because of the impairment of the confidence factor, which is a by-product of a losing streak. You have to work very hard to restore that confidence, and cutting back trading helps achieve that goal.

Have A Predetermined Stop – Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I am getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis.

Accept the Risk – To whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.

Making Mistakes Is Part of Business – According to Bruce Kovner: Michael Marcus [another top trader] taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgement, being wrong, making your next best judgement, being wrong, making your third best judgement, and then doubling your money.

Six Positive Trading Behaviors

  
  Education
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Number61) Fresh Ideas – I’ve yet to see a very successful trader utilize the common chart patterns and indicator functions on software (oscillators, trendline tools, etc.) as primary sources for trade ideas. Rather, they look at markets in fresh ways, interpreting shifts in supply and demand from the order book or from transacted volume; finding unique relationships among sectors and markets; uncovering historical trading patterns; etc. Looking at markets in creative ways helps provide them with a competitive edge.
2) Solid Execution – If they’re buying, they’re generally waiting for a pullback and taking advantage of weakness; if they’re selling, they patiently wait for a bounce to get a good price. On average, they don’t chase markets up or down, and they pick their price levels for entries and exits. They won’t lift a market offer if they feel there’s a reasonable opportunity to get filled on a bid.
3) Thoughtful Position Sizing – The successful traders aren’t trying to hit home runs, and they don’t double up after a losing period (more…)

Profile Of The Successful Trader

  
  Education
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Trading is being young, imperfect, and human – not old, exacting, and scientific. It is not a set of techniques, but a commitment. You are to be an information processor. Not a swami. Not a guru. An information processor.

Participating in the markets can only develop your trading skills. You need to become a part of the markets, to know the state of the markets at any given time, and most importantly, to know yourself. You need to be patient, confident, and mentally tough.

Good traders offer no excuses, make no complaints. They live willingly with the vagaries of life and the markets.

In the early stages of your trading career, pay attention not only to whether you should buy or sell but also to how you have executed your trading ideas. You will learn more from your trades this way.

Never assume that the unreasonable or the unexpected cannot happen. It can. It does. It will.

Remember, you can learn a lot about trading from your mistakes. When you make a mistake – and you will – do not dwell on the negatives. Learn from the mistake and keep going.

Never forget that markets are made up of people. Think constantly about what others are doing, what they might do in the current circumstances, or what they might do when those circumstances change. Remember that, whenever you buy and hope to sell higher, the person you sell to will have to see the same opportunity at that higher price to be induced to buy.

Traders who lose follow one of several typical patterns. Some repeatedly suffer individual large losses that wipe out earlier gains or greatly increase a small loss. Others experience brief periods during which their trading wheels fall off: they lose discipline and control and make a series of bad trades as a result.
Wise traders make many small trades, remain involved, and constantly maintain and sharpen their feel for he market. For all of their work, they hope to receive some profit, even if it is small in terms of dollars. In addition, continual participation allows them to sense and recognize the few real opportunities when they arise. These generate large rewards that make the effort of trading truly worthwhile.

At the end of the chapter he lists specific observations that have a high enough probability of reoccurring he considers them rules:

  • If you find yourself holding a winning position, adding up your profits, and confidently projecting larger gains on the horizon, you are probably better off exiting the trade. The odds are that the trade has run its course.
  • When entering a trade with a market order and your fill is clearly better than expected, odds are it will end up being a losing trade. Good fill, bad trade. Get out!
  • If all your ‘trading buddies’ agree with your expectations regarding the next big move, it probably will not work out. If everyone’s conviction level is as strong as the consensus, do the opposite.

Don't Overtrade !!!

  
  Education
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art74img1 

Even a daytrader trading a five minute chart has no need to trade every day nor to trade all day long. You should be filtering your trades so that you take only the best of the best.

Overtrading was a problem that took me a long time to overcome because I did not know what I was looking for. Overtrading is a very serious problem, and veteran traders learn to avoid it. In fact, one way to know if a trader is a mature professional is to know if that trader conquered the problem of over trading. (more…)

Qualities of Successful Traders

  
  Education
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Emotional stability. You don’t have to be nuts to trade, but it helps!  That is a joke, of course. Emotional stability is grace under pressure. A successful trader must be able to remain calm in difficult situations. Traders that rank very high on the emotional stability scale have very low anxiety levels, remain calm, relaxed, and have a low suspicion level. They tend to be trusting individuals and are not paranoid. You won’t hear them blame the market makers for forcing the stock to hit their stop and they take responsibility for their actions. Successful traders tend to be well
grounded.
 

Discipline. Successful traders are ones that can follow the rules. They are the guys that drive the speed limit. They tend to be perfectionist and take pride in their work. They like to take a project from start to finish and get joy from completing it successfully. Pilots, trained to follow checklists, tend to make good traders. An impulse oriented individual will have difficulty achieving the discipline to become a successful trader.
 

Intelligence. Bill says that successful traders tend to be intelligent. They need not have the IQ of Einstein but they are above average in intelligence. They tend to be good problem solvers and good with numbers, such as statistics. They understand that trading is based on probability, that not every trade will work as planned.

ART OF TRADING Golden Rules

  
  Education
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1. Always wait for the setup: No Setup-No Trade.

2. THE BEST trades work almost right away.

3. Never take a big loss. If it doesn’t ‘feel’ right. Remove it!

4. Always perfect your craft and sharpen your skills(good traders are constantly learning)

5. Be patient with winning trades: Impatient with trades that fight back.

6. DISCIPLINE is the key to winning at everything!

7. Never get emotionally attached to trades, trading, losses or profits.

8. Always trade with the size that makes you unemotional(emotional trading is the quickest way out of this game).

9. Keeps things simple and do not over-think or over-complicate your trading. LESS IS ALWAYS MORE.

10. Stay humble at all times.

 

Financial Suicide

  
  Education
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“Most good traders would agree that risking less than 1% of equity in a trade (where 1% is the amount you lose if your stop loss was hit) is a prudent risk. Risking between 1 and 3% gets into the gunslinging range. Risking any more than 3% is usually financial suicide, and the average trader commits financial suicide all the time without knowing it”

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