Never under any circumstances reveal your trading positions to anyone. Your mind must be in complete harmony with your trading positions. When you reveal your positions to someone, they will immediately start to question the trade and start to erode your confidence and concentration in the trade. You will then be a less effective trader and eventually lose.
1. Making trades with insufficient study and practice.
2. Making trades out of harmony with the general trend.
3. Taking a position too late after a move is well under way or is completed.
4. Taking a position too soon due to impatience.
5. Improperly estimating the distance a stock should move.
6. Letting eagerness to make profits warp judgment.
7. Failing to keep a position sheet and selecting stocks on hunches rather than calculations.
8. Buying on bulges instead of waiting on reactions.
9. Failing to place and move stops.
Technically Yours/ASR TEAM
There is a random distribution between wins and losses for any given set of variables that define an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.
If you really believe in an uncertain outcome, then you also have to expect that virtually anything can happen. Otherwise, the moment you let your mind hold onto the notion that you know, you stop taking all of the unknown variables into consideration. Your mind won’t let you have it both ways. If you believe you know something, the moment is no longer unique.
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.
The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of positions, cutting my losses short to make myself mentally available to take the next opportunity.
The hardest thing to master as a trader once you understand Market Rhythm is not the market, it is YOU. Emotional trading will break you fast.
Trading is not hard, it is mastering your emotions that is. Trading will teach you more about your human short coming than visiting a psychiatrist. As a trader, you must learn the discipline of waiting for proper market set-ups. That is hard!
Your EMOTIONS are screaming for you to jump in or you will miss out. NOT TRUE!! If you miss one trade set-up, the market is generous and will give you another. Learn to trade in harmony with your trend and with proper signals.
The emotions that are deadly to your trading success.
REVENGE, we all know it and have done it. It happens when you are tricked by the market and decide to take another trade before looking at the big picture, then BAM you are on the wrong side of the trade again. Pissed off and refusing to move while your money is going further down the drain. Scared to let go for fear that you are going to get tricked again.
PANIC, that is when you lack the confidence to enter or ride a profitable trade. This happens when you have taken some hits and now you lack the confidence to trade profitably.
IMPATIENCE, this happens when you can’t wait for a proper trade set-up and jump on a price hiccup/retracement, often finding yourself on the wrong side of the trade.
ANGER, you know that feeling that comes over you when you have taken a hit or two and you want to kill your computer. (more…)
Never Revenge On The Market
There is a direct correlation between your ability to let the market tell you what it is likely to do next and the degree to which you have released yourself from the negative effects of any beliefs about losing, being wrong, and revenge on the markets. Not being aware of this relationship, most traders will continue to observe the market from a contaminated perspective
“I know it may sound strange to many readers, but there is an inverse relationship between analysis and trading results. More analysis or being able to make distinctions in the market’s behavior will not produce better trading results. There are many traders who find themselves caught in this exasperating loop, thinking that more or better analysis is going to give them the confidence they need to do what needs to be done to achieve success. It’s what I call a trading paradox that most traders find difficult, if not impossible to reconcile, until they realize you can’t use analysis to overcome fear of being wrong or losing money. It just doesn’t work!”
-Mark Douglas
“There is a random distribution between wins and losses for any given set of variables that defines an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like “right” and “wrong” or “win” and “lose” no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.”
-Mark Douglas (more…)
Trade in Private
Never under any circumstances reveal your trading positions to anyone. Your mind must be in complete harmony with your trading positions. When you reveal your positions to someone, they will immediately start to question the trade and start to erode your confidence and concentration in the trade. You will then be a less effective trader and
eventually lose.
Profit Ratio
You should set your profit ratio at 3 times your risk factor. Go back on the previous charts of the market you are trading and determine how much the market has risen or fallen and then set the loss ratio based on that.
There is a random distribution between wins and losses for any given set of variables that defines an edge.In other words ,based on the past performance of your edge ,you may know that out of the next 20 trades ,12 will be winners and 8 will will be losers.What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades.This truth makes trading a probability or numbers game.When you really believe that trading is simply a probability game ,concepts like “right “and “wrong ” or “win ” and “lose ” no longer have the same significance.As a result ,your expectations will be in harmony with the possibilities.
Contrary to popular belief by the majority of the general population and even investors and traders stocks are not tied to their fundamental values or even the companies that sold the shares to raise capital. Stock prices are tied to simply what the current buyer and seller in the market is willing to exchange ownership for. That is what determines price, nothing else. So the big question is what are the rules that govern the change in a stocks price?
The laws of economics governs price movement in the market. There are three laws articulated by legendary trader and market pioneer Richard Wyckoff that captures what causes current price reality and what changes it.
The Law of Supply and Demand
The excess of demand (buyers) over supply (sellers) causes a stock’s price to go up. The excess of supply over demand causes a stock’s price to go down.
The price is determined by the law of supply and demand.
The price moves up and down to balance the supply and demand to the equilibrium.
“The stock is only worth the other people are willing to pay for it”— (more…)
What is the most important part of your trading? The chart? Managing the risk? Finding the Holy Grail of trading that can’t lose? (I have bad news for you about the Holy Grail).
I am convinced how a trader emotionally reacts to the markets while trading will determine their success more than anything else.
Mark Douglas is a trader and author of Trading in the Zone and The Disciplined Trader two great trading books for traders at all levels that deal primarily with how to develop the correct mindset to be a successful trader.
My favorite Mark Douglas quotes.
Trader Psychology: (more…)
