|1. Managing the risk of ruin.|
Do not risk so much on any one trade that 10 losing trades in a row will destroy your account. risking 1% to 2% of your trading capital per trade is a great baseline for eliminating the risk of ruin.
2. Only trade with a positive risk/reward ratio.
Only take trades where your possible reward is at least two or three times the amount of capital you are risking in the trade.
3. Always trade in the direction of the prevailing trend.
Always trade in the direction of the flow of capital for your specific time frame. Shorting rockets and catching falling knives is not profitable in the long run.
4. Trade a robust system.
Back test and study your trading method, system, or style to ensure it is a winning system historically. The key is that it had bigger winners than losers over the long run in the past.
5. You must have the discipline to take your entries and exits as they are triggered.
You must take your entries when they trigger, your losses when they are hit, and your profits when a run is over to be a successful trader.
6. You must persevere through losing periods.
All successful traders were able to overcome their losing periods to come back and make the big money. If you quit you will not be around for the opportunity to win big.
7. If you want to be a winning trader you must follow your trading plan not your fear and greed.
Emotions will undo a trader more than anything else. Trading too big is due to greed, missing a winning trade due to no entry is a sign of fear, traders must trade the math and probabilities not their own opinions or emotions.
Archives of “knives” tagrss
Letting small losses turn into large losses.
— Refusing to take a loss at all.
— Bottom fishing/Catching falling knives.
— Averaging down.
— Shorting bulls and buying bears.
— Confusing the company with its stock.
— Falling in love with a “story.”
— Following the leader.
— Buying IPOs.
— Finding the Holy Grail.
— Excessive tape watching.
— Being undercapitalized.
— Letting the tax tail wag the stock dog.
— Relying on Blue Channels and Website Analysts
— Thinking this market stuff is easy.
— Thinking rather than looking.
|A Technical Analyst from (ASR ) and a Fundamental Analyst (Brokerage Firm )were chatting about the markets Yesterday.|
Accidentally one of them knocks a kitchen knife off the table landing right in the fundamental analyst’s foot!
The fundamental analyst yells at our technician, asking him why he didn’t catch the knife?
“You know Technicians don’t catch falling knives!” , our technician responded.
He in turn asks the fundamental analyst why he didn’t move his foot out of the way?
The Fundamental analyst responds, “ I didn’t think it could go that low”.
There are five key things that make all the difference in profitable trading:
Focus on a system with bigger wins than losses, big wins makes robustness a much easier thing to find. A 1:3 risk/return ratio makes it much easier to be profitable even with more losses than wins.
Trade in the direction of the trend, in my experience buying dips in a bull market and selling into strength in a bear market is a much easier process than calling tops and catching falling knives.
Trade small versus your buying power, most systems fail because traders simple trade too big causing losses and being wrong to set them back far too much. Small losses are easy to come back from a string of big losses is fatal.
Trade price action not opinions. Be quick to cut losses and patient to ride winners. Getting stuck on what you think should happen could be fatal when the market disagrees with you.
Your goal as a trader is to find an edge over the 90% of traders that lose money, once you have that edge the more you trade the right signals the better chance you have of being profitable. Before you have an edge the volume of trades work against you as your luck runs out.
Happy Diwali & Happy New Year Dear Subscribers & Our Readers, We wish U great Diwali & Great Coming New Year.
- Quit letting trades go through your original stop loss, you were wrong, get out. When you start hoping and stop managing your stops you are losing money.
- Quit over trading, only take the very best entries and trade the very best stocks in your system.
- Quit making up stories about why you decided to hold your position instead of taking your stop when it was hit. trade your plan.
- Stop trading your opinions and start trading what the price action is saying.
- Stop following people in social media that cause you to trade badly and lose money.
- Stop looking at BLUE Channels for trading and investing advice.
- Stop trading so big that you emotions are more involved in your trades than your mind.
- Disconnect your ego from your trading. You determine your risk size and entry the market chooses whether you win or lose.
- Quit riding an emotional roller coaster, your emotions should stay level when winning and losing. If not trade smaller.
- Quit buying falling knives and shorting rocket stocks, wait for confirmation and reversal before entering.