There is a random distribution between wins and losses for any given set of variables that defines an edge.In other words ,based on the past performance of your edge ,you may know that out of the next 20 trades ,12 will be winners and 8 will will be losers.What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades.This truth makes trading a probability or numbers game.When you really believe that trading is simply a probability game ,concepts like “right “and “wrong ” or “win ” and “lose ” no longer have the same significance.As a result ,your expectations will be in harmony with the possibilities.
Archives of “losers” tag
rssPsychological Makeup
You learn to distinguish the good traders from the bad, the successful techniques from the unsuccessful, and the good habits from the faulty. You also learn to distinguish the lover from the fighter, the winners from the losers, the serious from the frivolous, the cerebral from the superficial, and the friend from the foe. But above all, you learn that the psychological makeup of the trader is the single most critical element of success.
20 Trading Skills for Traders
1. Know the difference between trading and investing. We are traders, NOT investors. •• Disciplineis doing the right thing at the right time…every time! Survival in this business is dependent on the right decisions.
2. Don’t let losers run! Always use stops . Riskmanagement is very, very important in your trading. Don’t be stubborn in holding a position. Remember, while you may not be wrong often, The Market Is Always Right. The best traders are the first to admit (to themselves and the market) that they made a mistake.
3. Trade only price pattern set-ups.
4. Trade for skill, NOT the money. If you’re focused on the money aspect of trading…you’re not focused on the ‘trade’. And SCARED MONEY NEVER WINS!
5. Concentrate on what you are trade. Each market has personalities, habits and friends…get to know them all.
6. Focus on your executions. Remember, every execution is a trade. Money is valuable…don’t leave it on the table.
7. Model Yourself After Successful and Experienced Traders. You will be all you can be…but you need to start somewhere.
8. Be Teachable. Learn something new every day (or at least every week). The ‘Losing’ and ‘Winning’ trades can teach you a whole lot.
9. Remember that even the best of the best traders lose money. Learn to accept your losses and move on to the next trade. That’s just part of the business – you will NEVER win 100% of the time.
10. Use only 1 contract at the beginning. Large wins at the beginning generally means large exposure. (more…)
Discipline Trading
-The market pays you to be disciplined.
-Be disciplined every day, in every trade, and the market will reward you. But don’t
claim to be disciplined if you are not 100 percent of the time.
-Always lower your trade size when you’re trading poorly.
-Never turn a winner into a loser.
-Your biggest loser can?t exceed your biggest winner.
-Develop a methodology and stick with it. don?t change methodologies from day to
day.
-Be yourself. Don?t try to be someone else.
-You always want to be able to come back and play the next day. Once you reach
the daily downside limit, you must turn your PC off and call it a day. You can always come back tomorrow.
-Earn the right to trade bigger. Remember: if you are trading poorly with two lots you
must lower your trade size down to a one lot.
-Get out of your losers.
-The first loss is the best loss.
-Don?t hope and pray. If you do, you will lose.
-don?t worry about news. it?s history.
-Don?t speculate. if you do, you will lose.
-Love to lose money. What I mean is to accept the fact that you are going to have
losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly.
-If your trade is not going anywhere in a given timeframe, it?s time to exit.
-Never take a big loss. Only a big loss can hurt you. consistency builds confidence and control.
-Learn to sweat out (scale out) your winners.
-Make the same type of trades over and over again ? be a bricklayer.
don?t over-analyze. don?t procrastinate. don?t hesitate. if you do, you will lose.
all traders are created equal in the eyes of the market.
-It?s the market itself that wields the ultimate scale of justice.
10 Rules for Traders
Never add too a losing trade. In adding to a losing trade you are already wrong but now become more wrong with a bigger trading size. Adding to losers makes you a counter trend trader that usually ends badly.
- Never lose more than 1% to 2% of your trading capital on any one trade. This means use position sizing and stop losses so when you are wrong the loss is not a big deal.
- Never trade anything you do not understand 100%. Stay away from trading futures, forex, or options until you understand the risk and how exactly they work.
- Always trade with the trend in your own time frame.
- Only look for low risk, high reward, high probability setups , when there is nothing to trade, trade nothing.
- Trade the chart and price action, not your own opinions or predictions.
- You have to trade your own way, the trading style that you are comfortable with that fits you.
- If you do not have a full trading plan with rules on entries, exits and risk management stop trading until you create one.
- The size of your wins and losses ultimately determine your trading success regardless of your winning percentage.
Your risk management rules will ultimately determine the success of your technical trading system.
Taking losses
Taking losses is a tough part of doing business on Dalal Street and no one is immune to making mistakes. In fact, professionals know that the sin isn’t in taking a loss, but rather not taking a loss and letting a loser continue to eat away at the equity in a portfolio.
Losers not dealt with are like a cancer which can quickly spread throughout the body if it is left untreated.
3 Alexander Elder’s Words of Wisdom
You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody. This is the life of a successful trader. Many aspire to this but few succeed. An amateur looks at a quote screen and sees millions of dollars sparkle in front of his face. He reaches for the money – and loses. He reaches again – and loses more. Traders lose because the game is hard, or out of ignorance, or lack of discipline or because of both. – ALEXANDER ELDER
Every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management. These essentials are like three legs of a stool – remove one and the stool will fall, together with the person who sits on it. Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively on trading systems. Your trades must be based on clearly defined rules. You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound. You have to structure your money management so that no string of losses can kick you out of the game. – ALEXANDER ELDER
Markets offer unlimited opportunities for self-sabotage, as well as for self-fulfillment. Acting out your internal conflicts in the marketplace is an expensive proposition. Traders who are not at peace with themselves often try to fulfill their contradictory wishes in their market. If you do not know where you are going, you will wind up somewhere you never wanted to be. You can succeed in trading only if you can handle it as a serious intellectual pursuit. Emotional trading is lethal. To help ensure success, practice defensive money management. A good trader watches his or her capital as successfully as a professional scuba-diver watches his or her air supply. – ALEXANDER ELDER
Three Essential Components Of Trading
These essentials are three legs of a stool – remove one and the stool will fall together with the person who sits on it.
Losers try to build a stool with only one leg, or two at the most. They usually focus exclusively on trading systems.
Your trade must be based on clearly defined rules.
You have to analyze your feelings as you trade, to make sure that your decisions are intellectually sound.
You have to structure your money management so that no string of losses can kick you out of the game.
Every winner needs three essential components of trading: a sound individual psychology, a logical trading system and a good money management.
How many of these actions or beliefs apply to you?
| 1 | You do not believe in yourself. | If you do not think you can do it, how can you build the confidence you need to do battle with seasoned traders? |
| 2 | You do not trust in your ability. | If you do not have the proper education, how can you honestly think you can compete in the world’s largest playground, which is ruled by the two most powerful emotions: Fear and Greed. Lack of conviction manifests itself in many ways in this business (for example early exits or entries). |
| 3 | You fail to treat trading as if it were a business. | If you do not start thinking of this as a business and filling in your areas of weakness with solid reason and education, how can you achieve any level of success? You may hit a streak, but dumb luck runs out and then what? |
| 4 | You fail to plan. | Failure to define and achieve specific short-, medium- and long-term goals is a recipe for failure. |
| 5 | You are just lazy. | Your self-motivation and continued education are the lifeblood of your business. You must be eager to learn at all times regardless of past experiences or level of current knowledge. |
| 6 | You fail to equip your business properly. | You must have the proper tools. Do you think a doctor would perform surgery with a shank instead of a scalpel? How does a carpenter build without a saw or hammer? You get the idea. Use a reliable data and charting provider; get high-speed Internet access, and so forth. |
| 7 | You fail to understand how to accept a loss. | The markets do not know you. You do not exist to them in any other form than as the other side of a transaction. They do not care if it is your last dime, and your kids will not have shoes, and on, and on. We need losers to make money in this zero-minus-sum game, but taking an acceptable risk-reward ratio position and being wrong is not losing. |
| 8 | You fail to control your emotions. | Whether you win or lose, you should strive to remain at a comfortable emotional state while trading. Building the proper business plan for trading is enormously helpful in getting you to do just that. |
| 9 | You fail to learn and execute the fundamentals of trading. | Read, listen to CDs, attend seminars, read the Trade2win forums daily and practice your newfound knowledge. Everything you seek to know about trading has already been written or spoken about by successful traders. Try to learn something everyday. |
| 10 | You cannot cope with change. | There are three paradigms your mind should be a slave to: Patience, discipline and money management. The markets change everyday, and it is these three skills that allow us to be rigid and flexible at the same time in order to take consistent profits. Fight it and fail. |
| 11 | You cannot follow rules. | Losing traders often think that the rules of trading are made for others. Think that they are not for you? Think again. Fight them and you will have a very short trading career. |
| 12 | You are too greedy. | Thinking about trading profits instead of how you could better execute your plan is an obvious sign of greed. |
| 13 | You fail to do what you know. | Many people know what to do; yet very few people are able to do what they know. It is the rules of trading that force one to take action. |
| 14 | You fail to understand that hard work makes luck. | Some people think good traders are just lucky. Quite the contrary. They are studious, knowledge-seeking people who understand the paradigms they need to operate by. Take a close look at the traders you see as successful, and you will find years of education and hard work that created that “luck.” You can be just as “lucky.” |
| 15 | You blame others when the full responsibility is yours. | Accepting responsibility is the fulcrum point for succeeding in anything, especially trading. Doing something about it is the criterion. Execution is the reward, not the money. Money is the by-product of executing to plan. Do not blame the broker for a bad fill, when it was you who hesitated. This is just one example, but we are all aware of many others. |
| 16 | Your lack of persistence. | Be willing to take a stop loss at a particular price and time and just accept it without a fight. Be equally able to jump right back in at the same spot if the chart patterns and price action dictate that it is prudent. Or, even reverse your position if that is the prudent course to take. If your plan is drafted properly, you can be successful over time, but only if you are still around to be in business. |
| 17 | You fail to follow the first law of learning. | The first law of learning is repetition. Write it down and study it several times a day. Commit it to memory. Execute your plan. |
| 18 | You fail to establish and maintain a positive attitude. | This one is self-explanatory. |
| 19 | Yes, that’s right; this is the 19th reason for failure: BTNA (Big Talk No Action). | Many “traders” are not honest with themselves regarding the actual results of their trading; therefore, it is impossible to build the level of trust in themselves needed to act in the proper manner as situations arise. For example they put on a trade and then change their stop loss, or, even worse, they don’t place a stop order. This is a self-defeating cycle that is hard to break. However, if you are honest with yourself, you have a shot at improvement. |
7 Characteristics of Great Traders
1. Education, education, education.
The old cliche touted by politicians when they can’t think of anything clever to say to their audience. The importance of education to success in trading cannot be placed on a high enough pedestal. You have to learn to earn, the best traders work obsessively to refine their edge further to stay ahead of the curve.
2. Adapt or Die.
Market conditions change and technology advances, thus the conditions for trading are always evolving, the rise in mechanical trading is testament to that. The very best traders through a process of education and adaptation are constantly staying ahead of the curve and creating ever new and ingenious methods to profit from the markets evolution.
3. Fail to plan, you plan to fail.
The best traders have a well documented plan; they know exactly what they are looking for and follow that plan to the letter. Their preparation for a trade starts long before the market open, it is this meticulous planning and importantly adherence to that plan that helps them avoid the biggest demons for any trader, over trading and revenge trading.
4. “Be like Machine”
As human beings emotions pay a key role in our existence, for a trader emotions can be a source of great pain. Trading psychology and the management of your emotions in a trade play a key role in overall success. Fear and greed can cut your winners short and let your losers run. Dealing with emotions follows on from your plan; the more robust your plan the less likely you are to fall into the emotional mine field. (more…)