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Hesitation

  
  Education
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You 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. Therefore, you have to research your method so that you have the confidence that it works. Then, you have to start small, making trades that have a potential loss that you are comfortable with. As you gain confidence in your method and your ability, increase the trade size. With your new found confidence, stand in a crowded room and scream, “I am great!” Well, maybe don’t carry it that far.

Decisiveness

  
  Education
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“It’s better to be boldly decisive and risk being wrong than to agonize at length and be right too late” – Anonymous

“Procrastination in the name of reducing risk actually increases risk” – Colin Powell

“Take time to deliberate, but when the time for action has arrived, stop thinking and go in” – Napoleon Bonaparte

“In any moment of decision, the best thing you can do is the right thing, the next best thing you can do is the wrong thing, and the worst thing you can do is nothing” – Theodore Roosevelt

If you have the patience to wait for your setup then you better have the decisiveness to GET IN THE TRADE once price comes to you and your entry parameters are present. How many people wait for the trade to come and then when it arrives start analyzing if they should take it? When the trade has arrived it is time for action, not analyzation. This is what preparation is for. If you have done your homework there is no need for hesitation – you already know what to do. At the same time trading is not static. There are times when the odds are high that the market will reverse before your final target is hit. Do you have the decisiveness to reverse the position or flatten when this situation is present? It has been said that the number one ingredient to being a great trader is the trading guts to pull the trigger as soon as a reverse is anticipated. Be decisive.

The journey to becoming a winning trader

  
  Education
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You need to learn to execute without fear or hesitation.
You need to accept that you will get stopped out when you are wrong.
And you also need to accept that the only way to really accumulate profits on your account is to let winners run.
And finally, the fourth and probably most difficult step is to push your winners, or in other words, you add to your winning positions.

Four Poisons

  
  Education
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There is a Korean martial art called Kum Do. This is a brutal game that involves a fight to the death with very sharp swords. The way it is practiced today is with bamboo sticks, but the moves are the same. Kum Do teaches the student warriors to avoid what are called “The Four Poisons of the Mind.” These are: fear, confusion, hesitation and surprise. In Kum Do, the student must be constantly on guard to never anticipate the next move of the opponent. Likewise, the student must never allow his natural tendencies for prediction to get the better of him. Having a preconceived bias of what the markets or the opponents will do can lead to momentary confusion and—in the case of Kum Do—to death. A single blow in Kum Do can be lethal, and is the final cut, since the object is to kill the opponent. One blow—>death—>game over.

Instead of predicting, anticipating, and being in fear and confusion, you must do exactly the opposite if you are to survive a death blow from the market movements. You must watch with a calm, clear and collected attitude and strike at the right time. A few seconds of anticipation, hesitation or confusion can mean the difference between life and death in Kum Do—and wins or losses in the stock markets. If you are not in tune with the four poisons of fear, confusion, hesitation or surprise in the markets, you are at risk for ruin. Ruin means that your money is gone and the game is over.

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

Replace 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.

5 Signs You’ve Matured as a Trader

  
  Education
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1) Are Self Reliant: When you stop asking other people: “What do you think of the market?” While I respect the opinions of my colleagues, I DO NOT rely on them. I prefer to do my own homework, research and analysis. I LET THE MARKET tell me if I’m right or wrong.

The ultimate goal for traders is to make confident decisions on your own and trade with complete independence. You should not have to rely on the opinions of others because you should have conviction in your OWN ideas.

2) Stop Celebrating Winners: When you stop feeling the need to pound your chest every time you make 30 cents on a stock. (It is the flip side  of not getting depressed over every loss). Recognize what you did correctly and move on to the next trade.

Same thing goes for the stock market. Don’t act like you’ve never had success trading before.

3) Let the Trades Come to You:  When you stop feeling the need to trade every day and you get over the “fear of missing out.” This is the downfall of most traders.

It took me a while to shift my focus from worrying about “missing out” to playing great defense. Once I did this, I noticed an increase in my confidence level as a trader. Keep in mind, there will ALWAYS be opportunities and it’s okay if you miss a few. (more…)

Risk Management for Traders

  
  Education
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RISK-MANAGEMENT

  • Your first loss is the best loss.
  • Let winning positions run and cut losing positions short. The market is always right.
  • I finally understand why Kirk always says risk management is the most important thing.
  • Always know your exit. Before any trade is made, you must always identify your stop beforehand and then follow it without hesitation if it triggers.
  • Patterns and trends matter more than I thought…paying attention to them can provide better entry/exit points.
  • Patterns and measured moves are key but you have to wait until a pattern is triggered and the trigger holds.
  • Being patient and waiting for confirmation instead of trying to anticipate market movements.
  • Risk is greatest when everyone who wants to buy has already done so – Apple is the latest example!
  • Position sizing is my first and last line of defense.
  • Leverage is for losers.
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