Archives of “loser” tag

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What Not to Do-What to Do

  
  Education
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What Not to Do

  1. Have an opinion. One sure way to find yourself trading against the market is to have a market opinion. Trading with a rigid belief about what the market will do next can limit your ability to see what the market is actually telling you. 
  2. Have someone else’s opinion. Adopting some market guru’s market opinion is actually worse than having your own. Market gurus are notoriously inaccurate in their predictions.  Embracing another’s market judgment prevents you from learning to read the market on your own. Besides, it’s doubtful the guru will be texting you to let you know when his or her opinion has changed.
  3. Make your opinion public. Putting your bias into a chat room or forum thread makes it public. Making something public gives it a psychological life of its own. It’s hard to back off an opinion once you have announced it to others. 
  4. Let your ego get involved. Everyone wants to be right. In trading, learning to accept being wrong and the losses associated with being wrong is a big part of the game. This is no place for big egos.
  5. Ride a loser. Still wanting to be right? Having a bias, making it public, and getting your ego involved will cause you to hold losers far longer than you should.

What to Do

  1. Anticipate. Avoid having an inflexible bias. Identify areas where the market might turn, break out, or continue, and think through what that would look like. Anticipate the alternative ways the market may trade. When you see the market trading as anticipated, you already know what to do.
  2. Keep your own counsel. Avoid gurus. Jesse Livermore viewed trading as a “lone-wolf” business, and it is. Learn to read the market and make your own decisions.
  3. Avoid the forums while trading. Use the good ones as a source of education, but refrain from making your trades public.
  4. Check your ego. Be aware of when you want to be right. Ask yourself, “What is more important, being right or making money?” Then, make the correct decision.
  5. Cut losses short. Use hard stops and be merciless with losing trades. When the market turns against you, exit.

Trading Wisdom – Jesse Livermore

  
  Education
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JesseLivermore

Many books have been written by and about Mr. Livermore. He was a fascinating individual who reportedly made $100 million in a single day in the 1929 crash.
Legend has it that during the crash J.P. Morgan personally walked over to the N.Y. Stock exchange to ask Jesse Livermore to stop selling and start buying in order to save the markets.
He was an expert at following the right trend, with the exception of marriage. His wife was married about four times prior to marrying him, and all four husbands killed themselves, as did Jesse eventually. Not quite marriage counselor material, he is nonetheless one of the greatest wells of trading wisdom from which I have quenched my thirst in the past.
I am a much better trader because of Jesse Livermore. Every time I get stuck in a trading rut, I review my notes on his trading philosophies, which I would like to share with you below. (more…)

Perfectionism And Trading

  
  Education
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Perfectionism: Many traders try very hard to always be right. If the market shows that they are wrong with a loss, they work very hard to turn that loss into a profit. They may average down on a losing position or just hold the stock after their stop price has been exceeded with the hope that the market will turn around and turn their loser into a winner. It is the pursuit of perfectionism that causes us to ignore that trading stocks is a matter of probability. Trying to always be right leads to failure, for eventually, one of those losers fails to turn around and gives the trader a portfolio crushing loss.

The Art of Trading

  
Analysis, Education
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trading-floorA GOOD Trader WILL: 1. Always wait for the setup: No Setup-NO Trade. 2. Knows that winning trades work almost right away. 3. Never takes a big loss. Sell it and start over. 4. Takes small loses regularly. Winners will come. 5. Lets the stock keep working until it does NOT! 6. Is eager to sell a loser, NOT a winner! 7. Buys pullbacks/patterns on the strongest stocks. 8. Will always trade small so he is not emotional. 9. Takes responsibility for his own trades.

A GLASS OF WATER

  
  Education
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A young lady confidently walked around the room with a raised glass of water while leading and explaining stress management to an audience.  Everyone just knew she was going to ask the oft repeated question, ‘half empty or half full?’   But she fooled them all…

“How heavy is this glass of water?” she inquired with a smile.

Answers called out ranged from 8 oz. to 20 oz.

She replied, “The absolute weight doesn’t matter. It depends on how long I hold it. If I hold it for a minute, that’s not a problem. If I hold it for an hour, I’ll have an ache in my right arm. If I hold it for a day, you’ll have to call an ambulance. In each case it’s the same weight,but the longer I hold it, the heavier it becomes.”  She continued, “and that’s the way it is with stress. If we carry our burdens all the time sooner or later, as the burden becomes increasingly heavy, we won’t be able to carry on.”

“As with the glass of water, you have to put it down for a while and rest before holding it again. When we’re refreshed, we can carry on with the burden – holding stress longer and better each time practiced. So, as early in the evening as you can, put all your burdens down.  Don’t carry them through the evening and into the night… pick them up tomorrow. Whatever burdens you’re carrying now, let them down for a moment. Relax, pick them up later after you’ve rested. Life is short.” (more…)

Hope

  
  Education
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When the ship starts to sink, don’t pray. Jump.

Learning to take losses is an essential speculative technique. MOST never learn it. Take losses at once and move on. Take small losses to protect yourself from the big ones.
Beware the 3 obstacles to jumping ship:
– fear of regret ( that the loser will turn out to be a winner when you’ve bailed-out )
– Unwillingness to abandon part of an investment ( become willing to abandon )
– Difficulty of admitting you made a mistake.

Trading: The Difference Between Playing Offense & Defense

  
  Education
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The sooner traders learn to carefully manage risk the better off they will be. So many new traders come in with only the thoughts of profits dancing in their heads. This is equivalent to a football team only focusing on scoring points and not planning their defense.In trading you must play both sides of the ball. You have to be able to score points against the market and not allow the market to score back those points on you.

Your entries are your offense and your exits are your defense.

Letting a winner run is your offense, cutting your loser short is your defense.

Your automatic buy stop is your offense and your automatic stop loss is your defense.

Buying a monster stock is an offensive move, planning on how you will exit with your profits is your defensive move.

Identifying a trend is your offensive play creating a trading plan on how to trade it is your defensive play.

Your choice on what to trade is playing offense, choosing your position size is playing defense. (more…)

On Losses (and Profits).

  
  Education
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  • ‘Tradings only real secret is… The best loser is the long-term winner’ – Phantom
  • “Trading is a losing game, the best loser is the long-term winner” – Anonymous.
  • ‘Losses can either be lost money, or tuition in the school of trading’ – Courtesy of Mark Moskowitz.
  • ‘The worst advice I use to get was. – ‘No one went broke taking a profit’’. – Courtesy of John Berra.
  • “It seems that the necessary thing to do is not to fear mistakes, to plunge in, to do the best that one can, hoping to learn enough from blunders to correct them eventually.” – Abraham Maslow
  • ‘“Learn to like your losses”. Why? Because they are small!’ – Courtesy of Stuart A.Brown.
  • “One common adage…that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits.” – William Eckhardt.
  • “Its not about being right or wrong, rather, its about how much money you make when you’re right and how much you don’t lose when you’re wrong.” – George Soros.
  • “The first loss is the best loss.” – Jim Rogers.
  • “Losers average Losers”…Paul Tudor Jones.
  • “You learn nothing from your winners and everything from your losers.” – Courtesy of Jeff Horn.
  • ·“To become a Master Trader, you must first be a successful loser.” – Jeff Horn.

The Secret Sauce: A Knowledge Advantage

  
  Education
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“What is your secret sauce?

Click here to find out more!

No. 1, it’s possible, especially in inefficient markets, to gain a knowledge advantage. By definition, an inefficient market is one where hard work and skill can pay off. We can also control our psyche and emotions so that we don’t make the human mistakes that are so common. Of course the other thing is we have a philosophy of controlling risk. So that doesn’t necessarily make us the winner rather than the loser in the transaction, but it increases the probability that we engage in transactions of the sort that we and our clients want.”

There are a few ways to access better knowledge in an inefficient market.  You either have better sources, illegal information or you just simply have a superior understanding.  That’s why I always emphasize the importance of a sound top-down approach.  If you don’t understand the monetary system you’re more inclined to make mistakes in micro managing your portfolio.  You make silly mistakes like misunderstanding how the Fed operates, how QE works, how fiscal policy impacts the economy, how bond auctions works, etc etc. Misunderstanding these important macro functions has resulted in endless predictions for hyperinflation, rising bond yields, falling stock prices, etc.  But if you had a sound understanding of the system – if you had a better understanding – you sidestepped all of these predictions that were clearly wrong if you understood how the system works.

You don’t need to cheat or steal to get better information or knowledge.  Sometimes it’s a matter of putting in the effort to obtain it.

List of Mistakes by Traders

  
  Education
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Hesitation – fear of putting on a trade where price signals an entry because of what you think could possibly happen. Hey, it’s game of probability, and you’ll miss 100% of the shots you don’t take.

Chasing – running after the trade you hesitated on because of thinking about it too much, and now you think it will go forever without you. (It may go a long way without you, but don’t worry, another train will come along in a while.)

Overleveraging, averaging down, letting a loser run, trading without protective stops – all caused by the fact you are so certain price will do a certain thing that risk management is for stupid amateurs who get shaken out of “good” positions just when price is about to finally run their way.

Trading against a strong trend – you think price has run too high or too low because you have special indicators that tell you price is “overbought” or “oversold” and therefore has to reverse, even though price is showing you otherwise.

Taking profits too soon – you think no one ever went broke taking a profit and you think that normal price action retracements are reversals, so you grab tiny profits, while allowing losing trades to hit full stop, leaving you with a very poor reward:risk ratio.

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