If you don’t see anything, you don’t initiate a new position. You take risk only when you see an opportunity. Make it a habit to ask yourself for each trading or investing decision – do you have an edge or do you just hope to be right. Hope is not a strategy.
Archives of “habit” tag
rssDISCIPLINE & PASSION
| Discipline – Majority of traders are not disciplined in their approach, else they would not be failing. These failed traders simply hate to hear the word Discipline! As Jack Schwager points out in his book, ‘The New Market Wizards’, “Discipline was probably the most frequent word used by the exceptional traders that I interviewed. Often it was mentioned in an almost apologetic tone: ‘I know you’ve heard this a million times before, but believe me, it’s really important’.” Discipline allows you to more effectively plan your work (trades) and work (trade) your plan. Discipline – “Habit of Obedience” – yes the keyword being habit, i.e. have a Trading Plan and make a habit of following it. The golden rule should be No Signal – No Trade. Passion – We may spend a third of our life working, so you deserve to feel fulfilled in what you do, you do it because you love to do it! – Yes the monetary rewards are the by-product of your success in doing things you love to do. How can you be naturally successful at something, continue to fine-tune your trading skills, seek the services of a mentor, and stomach the ups and downs of the business and if you don’t know WHY you’re doing it? As Michael Jordan once said, “If you have a love for the game, your talent will eventually catch up to you.” So if you do not have the love for trading, will you succeed? To sum-up this Mental skill set PAIR (Discipline / Passion): You must be disciplined AND remain emotionally detached from the market. |
Twenty Six Market Wisdoms from Warren Buffett
1. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
2. Chains of habit are too light to be felt until they are too heavy to be broken.
3. Risk comes from not knowing what you’re doing.
4. Only when the tide goes out do you discover who’s been swimming naked.
5. If past history was all there was to the game, the richest people would be librarians.
6. I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
7. It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price
8. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful
9. Time is the friend of the wonderful business, the enemy of the mediocre. (more…)
18 Trading Wisdom for Traders
1. You will be tested mentally and emotionally this is not for the weak minded.
2. Master Traders are detached emotionally from profit or loss.
3. Boredom is the enemy of the master opportunist.
4. Haste is the enemy of great entry points.
5. Doubt is often followed by a lost opportunity.
6. The Trend will give you direction on your path.
7. Having an exit strategy prevents unnecessary pain.
8. The laws of probability give strength to your fingers.
9. Going against momentum brings forth the fools reward.
10. Better the bad trade that is unrewarding.
11. Habit is built on the principles of probability.
12. Know your exit point in the worst case scenario first.
13. The master trader is an escape artist.
14. When one knows the present they master the futures.
15. Set realistic goals and let the good times role.
16. A loss can be turned into a win when one is swift.
17. A master in day trading trades in an egoless state.
18. Times of great probability are like diamonds falling from the sky.
A Trading Journal Is Like Sex
So why is keeping a trading journal like sex? Well it’s because…
“When it’s good, it’s really really really good!… and when it’s bad, well, it’s better than nothing.”
Now, we’re not just saying this to get some laughs – this is trading, we take trading seriously, and we take the above statement seriously.
There is information out there on keeping a trading journal – but not nearly enough as there should be.
We won’t go on about the merits of keeping a trading journal – it should be obvious how important a journal is to your trading success.
Most people start one but don’t keep it going – which is a tragedy really as you only get the benefit of keeping a trading journal over time.
If you’ve tried and failed to keep a trading journal going; perhaps start again even in a small way, and keep it going through the good days and bad. You will find that not only does it get easier – it becomes a habit when you see how much it helps your trading.
Most importantly – remember that a bad trading journal is still better than no journal at all.
Self-Discipline in Trading
Having self-discipline is having the ability to follow through on your plans and goals. Often times we get tugged in various directions and enticed by making choices that don’t help us along our path to our goals and fulfillment.
“The path of least resistance is what makes all rivers and some men crooked.”
– Napoleon Hill
Self-discipline is the ability to make the conscious choice (ultimately it becomes a habit) of doing the thing that will move you towards your goal – and sometimes it’s the hard or unnatural or unpopular thing to do. It’s foregoing instant gratification for the longer term objective. Typically, however, people operate on autopilot and this is dangerous when you have not yet developed the right ‘habits’ for success.
In the trading game, you must have self-discipline. You must look at the entire forest and not focus on one tree. If you get too caught up in each and every trade, you will lose sight of the larger goal.
The key is to care a lot about your overall trading progress, but not care too much about any individual trade.
Your Identity also plays a huge role in this because if you see yourself as someone who lacks self-discipline, then all the will power in the world will not overpower this. You are someone, in your mind, who lacks self-discipline.
So the key components to have self-discipline in Trading are: (more…)
Trading Rules to become Great Trader
Time for another list of Trading Rules . Make it a habit to reread these trading rules every now and then.
1. Buying a weak stock is like betting on a slow horse. It is retarded.
2. Stocks are only cheap if they are going higher after you buy them.
3. Never trust a person more than the market. People lie, the market does not.
4. Controlling losers is a must; let your winners run out of control.
5. Simplicity in trading demonstrates wisdom. Complexity is the sign of inexperience.
6. Have loyalty to your family, your dog, your team. Have no loyalty to your stocks.
7. Emotional traders want to give the disciplined their money.
8. Trends have counter trends to shake the weak hands out of the market. (more…)
4 Points to be Successful Traders
1) Diversify: If you have a pattern you trade successfully, you don’t have to grow your size. Instead, look to diversify to a different pattern (different market, different time frame) not correlated with the first. You’ll smooth out your returns, as one pattern makes money while the other experiences drawdown. You’ll also achieve the portfolio manager’s goal of superior return for less risk exposure.
2) Review Entries: Review your trades for the week and see how much heat you took on your winners. This will give you an idea of how good your entries are.
3) Review Exits: Review your trades for the week and see if the market went in your favor or against you after you exited. This will give you an idea of how good your exits are.
4) Work Orders: Get into the habit of working orders to buy at bid, sell at offer or to place orders between the bid and offer to avoid paying a price that is out of line with “fair value”. For the frequent trader, the single tick saved by good execution adds up over time.
The successful traders I’ve worked with never stop working on themselves. This is equally true of successful athletes, musicians, and chess champions. Small, steady improvements can create massively greater performance over time.
Jesse Livermore Advice – How To Trade In A Bull Market
The first quote is from the foreword by Jack Schwager the ensuing excerpt in my opinion is one of the most important passages in ‘Reminiscences’. Enjoy!
I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.
In Fullerton’s there were the usual crowd. All
grades! Well, there was one old chap who was not like the others. To begin with, he was a much older man. Another thing was that he never volunteered advice and never bragged of his winnings. He was a great hand for listening very attentively to the others.
He did not seem very keen to get tips that is, he never asked the talkers what they’d heard or what they knew. But when somebody gave him one he always thanked the tipster very politely. Sometimes he thanked the tipster again when the tip turned out O.K. But if it went wrong he never whined, so that nobody could tell whether he followed it or let it slide by. It was a legend of the office that the old jigger was rich and could swing quite a line. But he wasn’t donating much to the firm in the way of commissions; at least not that anyone could see. His name was Partridge, but they nicknamed him Turkey behind his back, because he was so thick-chested and had a habit of strutting about the various rooms, with the point of his chin resting on his breast.
The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others, used to go to old Partridge and tell him what some friend of a friend of an insider had advised them to do in a certain stock. They would tell him what they had not done with the tip so he would tell them what they ought to do. But whether the tip they had was to buy or to sell, the old chap’s answer was always the same.
The customer would finish the tale of his perplexity and then ask: “What do you think I ought to do?” (more…)
Discipline
A day trader should leave no room for fear and greed to take over, otherwise, this will be the key to your losses. A good trader should be disciplined, make discipline a habit, and act in accord with trading systems/strategies. You can do your trade in a consistent and reliable manner this way. Certain situations require an individual to make decisions based on their pre-set criteria and parameters.
You should make it a point to habitually follow your trading system/plan. When you’re making trading decisions, don’t let your emotions rule you. A day trader should always be disciplined, and once you attain your objective, leave the market first. Oftentimes people plunge in deeper because they are influenced by greed and fear.
There are also day traders who are quite reluctant to lose money. For instance your stock goes down,and you’re still hoping that after some time it will rise again. And to your surprise, the share price goes further down. If only you were not reluctant to lose money, you could have sold it the first time its price went down, and prevent further loss.
Day traders need to make fast executions and confirmations of the trade, so you must have a fast internet connection. They also need to receive and deliver quotes, news, and other pertinent market data. A fast internet connection allows you to make your day trading in a timely fashion. If you’re serious with your day trading. You would need hardware and software requirements to put a sufficient platform at home for online trading.
You can practice through simulated trading before using real money. Here you can incorporate all your trading techniques and see if they actually work. Don’t be a scared to lose a certain amount of money. But it doesn’t mean that you should not limit your losses. Most importantly, you should learn from your past losses. Becoming a day trader is a simple thing. But in any case it requires dedication, time and effort. You will reap profits that you’ve never imagined, if you are able to put all of these things together.