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Worries of Day Traders

Here is what traders choose to worry about (among others I am sure).  These so-called worries are usually in the form of a question and revolve around losing money:

1.  Will this trade make money?

2.  Will this trade hit a profit target?

3.  Will this trade reverse quickly against me?

4.  Will my gain turn into a loss?

5.  Will unknown news affect my trade?

6.  What if I have not done enough homework?

7.  What if my strategy is not sound?

8.  Will Cramer disagree (I had to throw this one in)?

9.  What if I get out too soon?

10.  Did I buy the right stock?

11.  What if I miss a potential move?

3 New Trading Rules

-THE MORE STUBBORN YOU ARE, THE MORE YOU WILL LOSE.  THE STOCK MARKET IS ALWAYS RIGHT.

-DON’T CHASE STOCKS JUST TO DO A TRADE.  AVOID BOREDOM TRADES.  IF NO TRADE IS THERE, PASS, AND SOMETIMES DON’T TRADE ANY STOCKS AT ALL.

-TRY TO GET IN BEFORE THE HEADLINES INSTEAD OF BUYING THE HEADLINES.   Market homework absolutely required to be a success.

Decisiveness

“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.

5 Expensive Words

Whether it’s been on the winning side of trades where I’ve tried to squeeze the last Rs 2 out of a stock, or it’s a losing position that has been trying to tell me I’m wrong (those numbers are RED for a reason!), I am guilty! 

Oddly enough, as cheap as it is to enter trades with commission structures so affordable, have you ever noticed just how expensive it can be to stay in a trade?

We all know the rules….
• Obey thy stop!
• Never Believe in your stock!
• Don’t let a trade become an investment!

…..yet it is so easy to break them. It’s a solitary job, and the only person to prevent you from compounding your mistakes is the one you see in the mirror.

So, be your own ally. Have a trading plan in place before you login to your account. Do your homework. Set hard stops as soon as your orders are filled, and let those safety nets keep your losses small (we all know how easy it is to blow a mental stop).

Be smart! Trading is about real money, not just flickering numbers on a screen. Be prepared and protect your capital at all costs. That guy in the mirror will hold you accountable the next time you see him!

Six Rules of Michael Steinhardt

Michael Steinhardt was one of the most successful hedge fund managers of all time. A dollar invested with Steinhardt Partners LP in 1967 was worth $481 when Steinhardt retired in 1995.

The following six rules were pulled out from a speech he gave:

1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.

2. Always make your living doing something you enjoy: Devote your full intensity for success over the long-term.

3. Be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.

4. Make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation. (more…)

Trading: Doing the Homework

HOMEWORKMany new traders fail in the stock market simply because they rush in without putting in the proper time and discipline in doing their homework. Trading is a professional endeavor much like any other career, you will only get out of it what you put into it. There is no easy money, you will have to earn it by out witting, out playing, and out smarting the majority of other market participants.

You need to learn ten things to be a successful trader:

  1. How to manager your risk per trade.
  2. What systems and methods really make money over the long term.
  3. What system fits your personality and beliefs about the market.
  4. How much heat you can you handle. How big can you trade with out emotions taking over?
  5. You must learn how the market actually works, trends, flows, and functions.
  6. Learn to focus only on what makes money in the market, everything else is noise.
  7. Discover who the greatest traders of all time were and study how they operated.
  8. Find out what the best books on trading are and read them.
  9. Study the charts of the stocks you are trading to understand how it works with trends, support, resistance, and moving averages.
  10. Practice paper trading, simulated accounts, and trading small positions of real money until you have mastered your trading plan. (more…)

Winning Attitude

Developing a Winning Attitude will stop negative thoughts from creeping in, and outside influences from changing your plan. Here are my thoughts about developing a winning attitude:

  1. A positive attitude enhances your market performance.
  2. Don’t dwell on losses if they are part of the system’s performance.
  3. Attaining a goal starts by having a goal. Avoid setting goals that cannot be achieved. Achieving your goals means sticking to your system each day.
  4. Achieving your goals means doing the homework before the market opens.
  5. Achieving your goals means placing all of orders ahead of time.
  6. Understand how your system is constructed and its maturity before you take the first trade.
  7. Achieving your goals means following through from start to finish.
  8. Focus on the next winning trade, and leave the last trade behind.
  9. Be organized, consistent, set goals and follow through.

20 Trading Advice for Traders

  1. You have to love trading to do the work that takes you over the hump to winning.

  2. Successful traders are not born, they are built through hard work and discipline.

  3. Trading is not complicated, discipline, perseverance, risk management, passion, and a winning method that fits your personality is all you need. If you have them you will win, if you are missing one you lose.

  4. Where you are currently as a trader is not where you have to stay, the right homework done with an open mind can move you into a different place.

  5. Trading skill is built through work ethic.

  6. You must dedicate yourself to winning at trading. Every day you improve by working at it. (more…)

10 Points -Why Traders lose Money

  1. Not honoring your original stops. Big losses make winning systems losing ones.

  2. Quit trading it during draw downs. All systems have losing streaks, the key is to manage risk and stick to it until the system gets make to a winning streak.
  3. Lack of discipline, drifting from taking defined entries and exit signals to opinions is hazardous.
  4. Trading too big, no system can survive huge positions sizing that makes the first string of losses the last.
  5. Style drift is deadly, slowly changing your trading plan during active trades is not good. Research comes after hours and before changes are made. (more…)

What is Luck & What is Skill in Trading?

Luck is picking the right stock and riding it up for great profits, skill is knowing when to get out and lock in profits.

Luck is returning 20% in one month, skill is returning over 20% a year for 5 straight years.

Luck is making money in a bull market, skill is making money in a bear market.

Luck is making money when the market matches your perma bull or perma bear style, skill is making money in both bull and bear markets.

Luck is picking one monster stock, skill is picking three monster stocks back to back.

Luck is having one big bet pay off for huge profits, skill is surviving 200 straight trades and not blowing up your account.

Luck is surviving the market while not knowing what you are doing, skill is acquired after you have done your homework.

So, do you have skills as a trader or have you just been lucky? So far………