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Most Common Advice is Ineffective

  
  Education
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ADVICE FOR TRADERS“Plan the trade, and trade the plan!” is perhaps the most common advice given to traders. As far as advice goes, it’s well meaning, but unfortunately falls well short of addressing the problem most traders actually face. 

Looking at the advice, it has two parts. The first part says you need a plan. No argument there. But the second part, about executing the plan, that’s where the problems appear. Why?

The two parts to the advice ‘plan the trade’ and the ‘trade the plan’ require two very different skill sets. Without understanding the different skills required, it’s highly likely that you will continue to regularly veer from your plan.

Here’s the disconnect. Planning the trade depends on your intellect. And most of the time, the development of the plan does not occur in the heat of battle.  It’s relatively easily to let your intellect guide you, to be the primary driver when you’re not in the heat of battle. But in the heat of battle, when we have to decide right now whether to enter or exit, an entirely different situation occurs. (more…)

The art of War

  
  Education
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Sun Tzu, the author of The Art of War, would make a great stock trader.  Although The Art of War is a 2500 year old military treatise it could just as easily be written for today’s stock trader as the principles outlined therein are as applicable in the stock market as in the theatre of war.  I read The Art of War again this past weekend and highlighted what I believe are some of the most pertinent and applicable principles for stock traders as seen through the eyes of Sun Tzu the would be stock trader.   Make sure you copy and post these in a prominent place for quick reference when in the heat of battle.

I. 17  When the market is rewarding your trading strategy, you should modify your position sizing accordingly.

I. 26  Now the successful trader prepares before he enters battle.  The unsuccessful trader makes but a few, if any, preparations before he enters battle.  Proper preparation leads to victory; a little preparation leads to defeat; and no preparation leads to ultimate destruction!  The one who is properly prepared is the one who is most likely to win.

II. 7   Appreciating the gains better helps you accept the losses.

II. 19  In trading, let your great object be a quick and decisive victory, not the slow death of a lengthy loss.

III. 18  If you know who the enemy is and you know yourself, you will never fear the next trade.  If you know yourself but not the enemy, you will win one lose one.  If you do not know the enemy or yourself, you will lose on each trade.

IV. 1  The good traders of old first put themselves beyond the possibility of defeat and then waited for the right time to defeat the enemy.

IV. 4  It is possible to know technical analysis without being able to properly apply it.

IV. 13  The successful trader wins his battles by making no mistakes.  Making no mistakes establishes the certainty of victory.

V. 13  The quality of entry is like a well-timed swoop of a falcon which enables it to strike and destroy its victim.

V. 15  Proper preparation may be likened to the bending of a crossbow; decision, to the releasing of the trigger.

VI.  5  Take advantage of opportunities such as support and resistance where the enemy must put up a strong defense; take swift action and catch the enemy off guard.

VI. 19  Be prepared for battle by knowing the exact time and place for proper trade entry.

VI. 32  Just as water retains no constant shape, so in trading know the market is constantly changing.

VII. 5  Trading with familiar stocks is advantageous; with unfamiliar most dangerous.

VII. 13  We are not properly prepared to trade a stock until we are familiar with the most likely direction of the general market.

VII. 21  Ponder and deliberate before you enter a trade.

VII. 28  Now the trader’s spirit is keenest in the pre-market; by noon day it is becoming weary; and by post market ready to relax.

VII. 32  To refrain from entering a market that is prepared to defend its current course is the art of practicing patience by studying current market conditions.

VIII. 3  There are trades which must not be taken; sectors that are not ready to be attacked; patterns that are set up for failure; positions that are to be surrendered; egotistical commands that are not to be obeyed.

IX.  28  In a mixed market when some stocks are seen advancing and some retreating, it is a trap.

IX.  41  He who does not think through his trade while making light of the situation is sure to fall victim to a loss.

X.  24  The trader who makes money without coveting fame and loses money without fearing disgrace, whose only thought is to protect his equity and ignore his ego, is considered to be a jewel of the kingdom.

XI. 17  When it is to the trader’s advantage, he will enter a trade; when otherwise he will not.

XI. 67  Trade in the path defined by rules and do not face the enemy until you feel you can trade with confidence.

XII.  15  Unhappy is the fate of the trader who tries to win his battles and succeed in his decisions without cultivating the spirit of confidence, for the result will be a waste of time and a drain on his trading account.

XII.  17  Do not trade unless you see there is an advantage in doing so; use not your money unless there is something to be gained.

XII.  22 The successful trader is heedful and full of caution.  This is the way to have peace of mind and to live to trade another day.

XIII.  4  What enables the wise and successful traders to trade and conquer, and achieve things beyond the reach of ordinary traders, is proper preparation.

Common Advice is Ineffective

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

“Plan the trade, and trade the plan!” is perhaps the most common advice given to traders. As far as advice goes, it’s well meaning, but unfortunately falls well short of addressing the problem most traders actually face. 

Looking at the advice, it has two parts. The first part says you need a plan. No argument there. But the second part, about executing the plan, that’s where the problems appear. Why?

The two parts to the advice ‘plan the trade’ and the ‘trade the plan’ require two very different skill sets. Without understanding the different skills required, it’s highly likely that you will continue to regularly veer from your plan. (more…)

Most Common Advice is Ineffective

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

“Plan the trade, and trade the plan!” is perhaps the most common advice given to traders. As far as advice goes, it’s well meaning, but unfortunately falls well short of addressing the problem most traders actually face. 

Looking at the advice, it has two parts. The first part says you need a plan. No argument there. But the second part, about executing the plan, that’s where the problems appear. Why?

The two parts to the advice ‘plan the trade’ and the ‘trade the plan’ require two very different skill sets. Without understanding the different skills required, it’s highly likely that you will continue to regularly veer from your plan.

Here’s the disconnect. Planning the trade depends on your intellect. And most of the time, the development of the plan does not occur in the heat of battle.  It’s relatively easily to let your intellect guide you, to be the primary driver when you’re not in the heat of battle. But in the heat of battle, when we have to decide right now whether to enter or exit, an entirely different situation occurs. (more…)

Five Qualities For Successful Trader

  
  Education
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  1. Capacity for Prudent Risk-taking.The young successful trader is not afraid to go after markets aggressively when the opportunity presents itself.
  2. Capacity for Rule Governance. The young successful trader has the self-control to follow rules in the heat of battle, such as rules of position sizing and risk management.
  3. Capacity for Sustained Effort.The trader uses productive time to do research, preparation, work on himself, outside of market hours.
  4. Capacity for Emotional Resilience. All young traders will lose money early in their development and experience multiple frustrations. The successful ones will not lose self-confidence and motivation in the face of loss and frustrations.
  5. Capacity for Sound reasoning. The successful young trader exhibits an ability to synthesize data and generate market and trading scenarios.

Five qualities for Successful Traders

  
  Education
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secrets_successful_trader

  1. 1)Capacity for Prudent Risk-taking.The young successful trader is not afraid to go after markets aggressively when the opportunity presents itself.
  2. 2)Capacity for Rule Governance. The young successful trader has the self-control to follow rules in the heat of battle, such as rules of position sizing and risk management.
  3. 3)Capacity for Sustained Effort.The trader uses productive time to do research, preparation, work on himself, outside of market hours.
  4. 4)Capacity for Emotional Resilience. All young traders will lose money early in their development and experience multiple frustrations. The successful ones will not lose self-confidence and motivation in the face of loss and frustrations.

5)Capacity for Sound reasoning. The successful young trader exhibits an ability to synthesize data and generate market and trading scenarios.

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