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Hesitation

  
  Education
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Hesitation-1You are watching a stock that has all the signals you look for in an opportunity. The proper point to enter comes, but you wait. You second guess the opportunity and don’t buy the stock. Or, you bid for the stock at a price that is not likely to get filled if the opportunity does pan out the way you anticipate it will. As a result, you get left behind while the market pushes the stock higher. A short while after the initial entry signal, when the stock has made a decent gain, you decide to finally enter the trade. After all, the market has proven your analysis correct, so you must be smart, and right! Not long after you enter, the stock turns south and you end up with a losing trade. If only you had bought when you first thought about it.

The Solution

This is really just a confidence issue. You are either not confident in your ability to analyze stocks, or you are not confident in the methodology that you are using to pick trades. (more…)

9 Steps for Traders

  
  Education
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1- When you see a trade setup you like, pull the trigger without hesitation

It looks so simple but it isn’t! If your mind is not 100% ready to take the trades when they present themselves to you, you’ll miss them, you’ll be just watching and will let them go without any apparent reason why, and then when you realize what you just did, your reaction is to get angry! Just to make you jump into an unplanned trade and lose… Prepare in advance, market is like playing chess, you have to look ahead for the next move.

2 – Always use STOPs

In case you don’t like to use physical stops, make sure you’ll be able to stop in case it breaks the limits you’ve set for that trade

 

3 – Anything can happen

Try to start the morning with a free state of mind so that you’ll be able “to listen” to the market.

4 – Always lower your trade size when you’re losing

If you make two losing trades in a row, lower trade size until you get in tune with the market again.

5 – Never turn a winning trade into a loser

That’s the reason why I like to take small portions of profit when market makes it available to me, I hate to see a winner turn into a loser, manage your trades well.

6 – Buy or develop a system and stick to it, don’t change it from day to day

Find a trading system that fits your personality and once you have it, if it gives you an edge, stick to it, don’t change it because it didn’t work on one or two days, otherwise you’ll keep changing systems forever and that means: losing money.

7 – Get out of losers

One of the most known market adages is: “Cut your losses and let your profits run.” Much easier said than done, but it’s very important that you do it, usually it’s much easier to do exactly the opposite… make sure you bear that in mind.

8 – Don’t worry about news

This one I like very much, the only thing news will do is to accelerate the targets, nothing else, most of the time, I completely trash the news and just follow what I see on my map.

9 – Monitor your progress, create your own trading journal

It is very important that you have a trading journal to track your success, so that you’ll be able to stop what you’re doing wrong and keep your strong strategies. I’ll talk about this in detail on my next post.

Hope this helps, happy trading!

Technically Yours

ASR TEAM


The Stock Trader's Steps to Success

  
  Education
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Mark Douglas, in his classic book on trading behavior entitled THE DISCIPLINED TRADER: DEVELOPING WINNING ATTITUDES, describes what he believes are the three steps to a trader’s ultimate, long term success.  The following steps have very little to do with technical anaysis and everything to do with the trader’s mental resources.  Douglas explains that the “more sophisticated you become as a trader, the more you will realize that trading is completely mental.  It isn’t you against the markets, it’s just you” (204).  So, if it is just you what are the steps?

1.  STAY FOCUSED ON WHAT YOU NEED TO LEARN.  The trader needs to stay focused on mastering the steps to achieving his goals and not the end result, knowing that the end result, money, will be a by-product of what he knows and how well he can act on what he knows.   A big part of what the trader needs to learn is how to accept missed opportunities.  “Except for the inability to accept a loss, there isn’t anything that has the potential to cause more psychological damage than a belief in missed opportunities.  When you release the energy out of the belief that it is possible to miss anything, you will no longer feel compelled to do something, like getting into trades too early or too late.” (205).

2.  LEARN HOW TO DEAL WITH LOSSES:  Douglas outlines two trading rules for dealing with losses both of which are designed to help the trader deal with any threat of pain and confront, head on, the inevitability of a loss.  The first is to predefine what a loss is in every potential trade.  By predefine Douglas means “determine what the market has to look like or do, to tell you that the trade no longer represents an opportunity” (206).   Secondly, “execute your losing trades immediately upon perception that they exist.  When losses are predefined and executed without hesitation, there is nothing to consider, weigh, or judge and consequently nothing to tempt yourself with” (207). 

3.  BECOME AN EXPERT AT ONE MARKET BEHAVIOR: Simplicity and focus is the mother of success.  “You need to start as small as possible and then gradually allow yourself to grow into greater and greater amounts of market information.  What you want to do is become an expert at just one particular type of behavior pattern that repeats itself with some degree of frequency. To become an expert, choose one simple traing system that identifies a pattern.  Your objective is to understand completely every aspect of the system.  In the meantime, it is important to avoid all other possibilities and information” (209).

Three simple steps yet ironically it is in the simplicity that traders find the most difficulty.  Trading is not difficult, we make it so.  Remember this the next time you enter a trade. 

Dear Readers & Traders………..Don’t miss to read this Book !!101% it should be in your Library.-Technically Yours ,Anirudh Sethi

Mark Douglas makes some great statements

  
  Education
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In the book Trading In The Zone, Mark Douglas makes some great statements that I truly believe are important.  He states:

I AM A CONSISTENT WINNER BECAUSE:

  • I objectively identify my edges
  • I predefine the risk of every trade
  • I completely ACCEPT the risk or I am willing to let go of the trade
  • I act on my edges without reservation or hesitation
  • I pay myself as the market makes money available to me
  • I continually monitor my susceptibility for making errors
  • I understand the absolute necessity of these principles of consistent success and, therefor, I always follow them with confidence and joy.

What you’ll notice about his statements is that it is he is assuming that you have already done the first set of bullets up top; that you have already created a plan and you already have a set of RULES.  Now you might ask, how do I know if my set of rules now will work next month or next year? GREAT question. The market dates back all the way into the late 1700’s.  There is literally a few HUNDRED years of data.  That’s why I say that back testing is KEY.  Now that doesn’t mean that you need to back-test 200 years of data.  Not even close.  You want to back-test a reasonable time depending on your time-frame of trading.  For example, if I plan on trading based on a daily system, then I might back-test the last 5-6 years.  If I’m going to trade based on an intra-day 3 minute chart, I would probably backtest about a year.  There is no way to KNOW what is going to happen, but trading really boils down to probabilities.  Time and time again the same things tend to repeat themselves.  Why do you think the markets tend do to the same things over and over.  Why does it seem that certain stocks that are in the same class look the same from a chart perspective?  How come a company will report great quarterly results, but still go down? It’s because there is a greater number of traders that BELIEVE that this is where an equity is too much or too little.  Why do you think there are people who are talking about a “recession” right now?  Again, it’s because the same things seem to be occurring that did prior to a previous recession and people have that BELIEF.

So what does all this mean?  What can you gather from all this?  Well, a few things actually.  One is to make sure you create, find and organize a PLAN for trading.  Think about it as if you wanted to open up a company.  Do the research and find out how some of these traders got started and what they did.  Once you’ve done that, write down your plan and look at your questions from up top.  Once you can answer ALL of them, then you are moving toward being a consistently profitable trader.  Then take a look at what Mark Douglas wrote.  You have to own these statements mentally.  You have to truly believe that you are a consistent winner because of all of the statements above.

Remember, you are starting a business, and if you want your business to succeed, you need to have a PLAN!

“Plan your trade, and trade your plan” – Anonymous

Trading Wisdom

  
  Education
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THE 5 FUNDAMENTAL TRUTHS OF TRADING:

 1. Anything can happen.
2. You don’t need to know what is going to happen next to make money.
3. There is a random distribution between wins and losses for any given set of
variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing
happening over another.
5. Every moment in the market is unique.

THE 7 PRINCIPLES OF CONSISTENCY:

 
1. I objectively identify my edges.
2. I predefine the risk of every trade.
3. I completely accept the risk or I am willing to let go of the trade.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success
and, therefore, I never violate them.

Trading psychology

  
  Education
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  • Trading psychologyStop trying to outsmart the market. NO ONE knows exactly where it will go.
  • With each decision you make comes stress:
    • The more decisions you make, the more likely you are to be wrong.
    • The more decisions you are used to making, the more pressure you’ll put on yourself to make even more decisions.
    • No one can be that right.
  • Forget about the “whys’ of the market. After all is said and done, the reasons will be known.
  • Don’t apply logic. Markets move on emotions — period!
  • Plan your trade and trade your plan.
  • Reduce the amount of decisions you make.
  • Make decisions and live with them (also a life lesson!).
    • Good decisions come from experience.
    • Experience comes from bad decisions.

    • How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise?

      
      Education
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    poison for TradersReplace fear with faith—faith in your trading model and trading plan

    Replace confusion with the attitude of being comfortable with uncertainty

    Replace hesitation with decisive action

    Replace surprise with taking nothing for granted and preparing yourself for anything.

    Mark Douglas :Quotes

      
      Education
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    page 121

    1) Anything can happen

    2) You don’t need to know what is going to happen next in order to make money.

    3) There is a random distribution between the wins and losses for any given set of variables that define an edge.

    4) An edge is nothing more than an indication of a higher probability of one thing happining over another.

    5) Every moment in the market is unique.

    Page 185

    I AM A CONSISTENT WINNER BECAUSE:

    1) I objectively indentify my edges.

    2) I predefine the risk of every trade.

    3) I completely accept the risk or I am willing to let go of the trade.

    4) I act on my edges without reservation or hesitation.

    5) I pay myself as the market makes money available to me.

    6) I continually monitor my susceptibility for making errors.

    7) I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.

    Self Improvement

      
      Education
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    self-improvementIf you are having trouble achieving your trading goals, take time out to examine the real causes of your problems. Working towards improvement will take a dedicated approach on your part. Identification of the problems are the first step. Attacking the problems one at a time is the first part of the solution. Doing the right thing at the right time based on the information you have should be your goal. Sit down and have an in depth talk with yourself and ask yourself some hard questions. For example: – do I have the emotional makeup necessary for this business? – do I have the financial reserves so that I am not relying on trading to pay the bills while I learn? – do I really enjoy doing this? Coming up with honest answers will be the only way to ultimately overcome issues that keep getting in your way. If you keep doing the same things, you will keep getting the same results, so you’ll need to change. Plain and simple. Best not to delay in sorting things out.

    Waiting for the right moment to enter and exit definitely comes with experience. Correct order execution, taking profits when they are offered and cutting losers are also vital to your success.

    My mind is not bogged down by indicators, rumours, conjecture or analyst’ reports. It is much easier for me then to concentrate on what really matters – recognizing what the charts are telling me and acting on this information.
    Concentrate on the problems you might have. Hesitation, taking big losers, selling winners to soon, screwing up order entry, racing heart and sweaty palms. (more…)

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