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Market is like an Ocean

  
  Education
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oceanThe market is like an ocean – it moves up and down regardless of what you want. You may feel joy when you buy a stock and it explodes in a rally. You may feel drenched with fear when you go short but the market rises and your equity melts with every uptick. These feelings have nothing to do with the market – they exist only inside you.

The market does not know you exist. You can do nothing to influence it. You can only control your behavior.

The ocean does not care about your welfare, but it has no wish to hurt you either. You may feel joy on a sunny day, when a gentle wind pushes your sailboat where you want it to go. You may feel panic on a stormy day when the ocean pushes your boat toward the rocks. Your feelings about the ocean exist only in your mind. They threaten your survival when you let your feelings rather than intellect control your behavior.

A sailor cannot control the ocean, but he can control himself. He studies currents and weather patterns. He learns safe sailing techniques and gains experience. He knows when to sail and when to stay in the harbor. A successful sailor uses his intelligence.

An ocean can be useful – you can fish in it and use its surface to get to other islands. An ocean can be dangerous – you can drown in it. The more rational your approach, the more likely you are to get what you want. When you act out your emotions, you cannot focus on the reality of the ocean.

A trader has to study trends and reversals in the market the way a sailor studies the ocean. He must trade on a small scale while learning to handle himself in the market. You can never control the market but you can learn to control yourself.

A beginner who has a string of profitable trades often feels he can walk on water. He starts taking wild risks and blows up his account. On the other hand, an amateur who takes several losses in a row often feels so demoralized that he cannot place an order even when his system gives him a strong signal to buy or sell. If trading makes you feel elated or frightened, you cannot fully use your intellect. When joy sweeps you off your feet, you will make irrational trades and lose. When fear grips you, you’ll miss profitable trades.

A professional trader uses his head and stays calm. Only amateurs become excited or depressed because of their trades. Emotional reactions are a luxury that you cannot afford in the markets.

Trading Psychology -Quotes

  
  Education
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  • To be a successful trader/investor, your intellect and emotion must work as a team, which is easier said than done.”

– James Dalton

  • ” Successful traders accept and expect losses. Losses are endemic to trading; they are the cost of doing business. The consistently successful trader accepts deep in his heart that his winnings will be tempered with inevitable loss. But the trader anticipates his ultimate triumph because he has structured the probabilities in his favor”.

-LBR

  • “To be a successful trader you need to trade without fear. When you use fear as a resource to limit yourself, you will create the very conditions you are trying to avoid. Or to say this another way, you will experience your fears.”

-Mark Douglas

  • “The man who insists upon seeing with perfect clearness before he decides, never decides.”

– Henri-Frederic Amiel

  • “…to be a successful trader, I must love to lose money and hate to make money…The first loss is the best loss; there is no better loss than the first loss…Trading is a discipline.”

– EEK

  • “One of the critical criteria I use in judging my traders is their ability to take a loss. If they can’t take a loss, they can’t trade.”

– John Mack

  • “If you have bad inventory, mark it down and sell it quickly.”

– Alan “Ace” Greenburg

  • “Never meet a margin call. (In other words, if the market is going against you, concede defeat quickly and liquidate before you really lose your shirt.)”

– James Grant

  • “Fail Often but never quit.”

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…)

Lose your ego

  
  Education
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No matter how much success you enjoy as a trader, you’ll never outsmart the market. If you think you can, you’re in for a very humbling experience. The market rules, always, and for everyone.

You need to silence your ego in order to listen to the market, to follow what your technical analysis is indicating – and not what your intellect (and your ego) think should happen. To trade effectively, you need to put yourself aside. At the same time, you cannot be so emotionally fragile that unprofitable trades shatter your confidence. Don’t be crushed by the market, but don’t ever think you’ve mastered it, either.

Becoming a Successful Speculator

  
  Education
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The capacity for rigorous thought; the flexibility and resilience to adapt to changing circumstances; the love of disciplined risk-taking; the hungry intellect: perhaps successful speculators already display those qualities in other life domains and then learn to apply them to markets.

An Hour With Arnold Palmer

  
  Education
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“It is deceptively simple, endlessly complicated, a child can play it well, and a grown man can never master it. Any single round of it is full of unexpected triumphs and perfect shots that end in disaster. It is almost a science, yet it is a puzzle without an answer. It is gratifying and tantalizing, precise and unpredictable. It requires complete concentration and total relaxation. It satisfies the soul and frustrates the intellect. It is at the same time, rewarding and maddening and it is without doubt, the greatest game mankind has ever invented.” – Arnold Palmer

What a wonderful quote about the game of golf. Although to a lesser extent, the same things can be said about trading as anyone who trades every day in the trenches will tell you.

I was reminded about this perspective this weekend when watching an hour interview Charlie Rose recently conducted with Mr. Palmer. Many people don’t know this, but it was an biography of Arnold Palmer that I read as a child which originally sparked my interest in taking up the game. So, all of these years of both frustration and incredible enjoyment, I owe directly to Mr. Palmer.

Now in the twilight of his years, I found this recent interview really enjoyable particularly after the 30 minute mark. If you have an opportunity to watch this, I thinkhis advice about developing a system is so very important especially for new traders and investors as well as what the discussion after that about what it takes to win. Much like the quote above, the perspectives are priceless. Even if you don’t play golf or even hate the game, don’t miss this interview!

Click Below Link and Enjoy

http://www.charlierose.com/view/interview/11823

Quotes from :Dr Alexander Elder's best seller Trading For A Living

  
  Education
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Proper money management is essential for successful trading.

A disciplined trader cuts his losses short and outperforms a loser who keeps hanging on and hoping.

As soon as you buy, place a stop-loss order.

Greed and fear destroy traders by clouding their minds. The only way to succeed in trading is to use your intellect.

The goal of a successful trader is to make the best trades. Money is secondary. If this surprises you, think how good professionals in any field operate. Good teachers, doctors, lawyers, farmers and others make money – but they do not count it while they work. If they do, the quality of their work suffers.

Serious traders place stops the moment they enter a trade.

We all like to hope that a trade will succeed – and a stop is a piece of reality that prevents traders from hanging on to empty hope.

Learning to place stops is like learning to drive defensively.

A stop is not a perfect tool but it is the best defensive tool we have.

The market is like an ocean

  
  Education
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trading_for_a_livingThe market is like an ocean – it moves up and down regardless of what you want. You may feel joy when you buy a stock and it explodes in a rally. You may feel drenched with fear when you go short but the market rises and your equity melts with every uptick. These feelings have nothing to do with the market – they exist only inside you.

The market does not know you exist. You can do nothing to influence it. You can only control your behavior.

The ocean does not care about your welfare, but it has no wish to hurt you either. You may feel joy on a sunny day, when a gentle wind pushes your sailboat where you want it to go. You may feel panic on a stormy day when the ocean pushes your boat toward the rocks. Your feelings about the ocean exist only in your mind. They threaten your survival when you let your feelings rather than intellect control your behavior.

A sailor cannot control the ocean, but he can control himself. He studies currents and weather patterns. He learns safe sailing techniques and gains experience. He knows when to sail and when to stay in the harbor. A successful sailor uses his intelligence.

The Heart and Mind of Trading

  
  Education
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Your heart has a mind, and your mind has a heart. In trading we need to bring heart and mind together. We need to feel intelligently and think with informed emotion.  The mind has intellectual emotion and the heart has emotional intellect.

It has been proven through heart transplants that the heart really does have a mind. Heart transplant recipients take on many characteristics, connections, habits, and hobbies of their donors. One woman who had never cared about dancing began to take ballroom dance lessons six weeks after her transplant. She became fascinated with ballroom dancing and became quite good at it. It turned out the donor of her heart had been a ballroom dancer. One child who had received the heart of another child upon seeing the dead child’s mother cried out, “Mommy, I’ve missed you!” And there are many other such reported instances.

It could even be assumed for the sake of this column, that the entire body, cell structure, and so forth are informed by both mind and heart. This is a column about trading, so let’s look at how mind and heart impact trading. We can start with the metaphors of mind and heart.

What is the heart of your trading? Is it analysis? Is it intuition?  Is it thought corrected by feeling or feeling balanced by analysis? Is it an outside system created by you or someone else that you employ with emotional or thoughtful action?

Do you trade with heart?  Do you put your whole self into it? And does that work for you?

Do you trade with an intellectual detachment? And does that support your chosen results?

What would happen if you brought the two together? What if you traded committed to your heart’s desire but also retained an intellectual remove from immediate results?  What if you committed yourself to replicating a verified and trusted method in the market and retained an optimistic view of the final results even while you observed with curiosity the current unfolding of the market?

We need balance in life and in trading. By bringing heart and mind and even body into the trading, we can seek to bring all of ourselves into the equation. We can do it mindfully with heart and clear purpose.

Common Advice is Ineffective

  
  Education
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“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…)

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