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Timeless Trading Wisdom

  
  Education
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Trading wisdomTrading System –  The trading system gives the trader the ability to control his or her emotional states rather than allowing them to control him. A system is a disciplined method for organizing dynamic, ever-changing market phenomena.

Risk Control – If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

Psychological 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.

The Easy Middle – The beginning of a price move is usually hard to trade because you are not sure whether you are right about the direction of the trend. The end is hard because people start taking profits and the market gets very choppy. The middle of the move is what I call the easy part.

Cut Back Trading Size When Losing – When you are in a losing streak, your ability to properly assimilate and analyze information starts to become distorted because of the impairment of the confidence factor, which is a by-product of a losing streak. You have to work very hard to restore that confidence, and cutting back trading helps achieve that goal.

Have A Predetermined Stop – Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I am getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis.

Accept the Risk – To whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.

Making Mistakes Is Part of Business – According to Bruce Kovner: Michael Marcus [another top trader] taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgement, being wrong, making your next best judgement, being wrong, making your third best judgement, and then doubling your money.

20 Habits of Wealthy Traders

  
  Education
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1)      Patient with winners and impatient with losers
2)      Making money is more important than being right
3)      View Tech Analysis as a picture of where traders are lining up to buy and sell
4)      Before they enter every trade they will know profit target or stop exit
5)      Approach trade no.5 with the same conviction as the previous 4 losing trades
6)      Use naked charts
a)      As we mature we begin peeling off indicators
b)      Prices action is key
7)      Comfortable making decisions with incomplete information
8)      Stopped trying to pick tops & bottoms long ago
a)      They make their money in the meat/middle of a trend (wait for confirmation)
b)      A trend is much more likely to continue than it is to reverse
9)      Do not think of the market as expensive or cheap
a)      Ignore whether you think something is overpriced or understand, think price action
10)  Aggressive with trade size when doing well or modest when not
a)      Do more of what is making, less of what is not
11)  Realised that the market will be open tomorrow (more…)

10 Trading Thoughts

  
  Education
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1. You only have three choices when you are in a bad position, and it is not hard to figure out what to do:
(1) Get out
(2) Double up, or
(3) Spread it off.

I have always found getting out to be the best of all three choices.

  1. No opinion on the market or you are doubtful about market direction? Then stay out. Remember, when in doubt, stay out.
  2. Don’t ever let anyone know how big your wallet is, and don’t ever let anyone know how small it is either.
  3. If you snooze, you lose. Know your markets, when they trade, and what reports will affect the market price.
  4. The markets will always let you in on the losers; the market’s job is to keep you out of winners. Dump the dogs and ride the winning tide.
  5. Stops are not for sissies.
  6. Plan your trade, then trade your plan. He who fails to plan, plans to fail.
  7. Buy the rumor and sell the fact. Watch for volatility in these situations; it usually marks tops or bottoms in the markets.
  8. Buy low, sell high. Or buy it when nobody wants it, and sell it when everybody has to have it!
  9. It’s okay to lose your shirt, just don’t lose your pants; that is where your wallet is.

One last thought to leave with you. It applies not only to every-day life but to trading the markets as well:
Success is measured not so much by the wealth or position you have gained, but rather by the obstacles you have overcome to succeed!

51 Professional Trading Tips

  
  Education
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1. Trading is simple, but it is not easy.

2.  When you get into a trade watch for the signs that you might be wrong.

3.  Trading should be boring.

4.  Amateur traders turn into professional traders once they stop looking for the “next great indicator.”

5.  You are trading other traders, not stocks or futures contracts.

6.  Be very aware of your own emotions.

7.  Watch yourself for too much excitement.

8.  Don’t overtrade.

9.  If you come into trading with the idea of making big money you are doomed.

10.  Don’t focus on the money.

11.  Do not impose your will on the market.

12.  The best way to minimize risk is to not trade when it is not time to trade. 

13.  There is no need to trade five days a week.  

14.  Refuse to damage your capital.

15.  Stay relaxed.

16.  Never let a day trade turn into an overnight trade.

17.  Keep winners as long as they are moving your way.

18.  Don’t overweight your trades.

19.  There is no logical reason to hesitate in taking a stop.

20.  Professional traders take losses because they trust themselves to do what is right.

21.  Once you take a loss, forget about it and move on.

22.  Find out what loss parameters work best for your setup and adjust them accordingly.

23.  Get a feel for market direction by “drilling down” (looking at multiple time frames).

24.  Develop confidence by knowing and executing your trade setups the same way every time.

25.  Don’t be ridiculous and stupid by adding to losers.

26.  Try to enter a full size position right away.

27.  Ring the register and scale out of your position.

28.  Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment.

29.  You want to own the stock before it breaks out and sell when amateurs are getting in after the move.

30.  Embracing your opinion leads to financial ruin.

31.  Discipline is not learned until you wipe out a trading account.

32.  Siphon off your trading profits each month and stick them in a money market account.

33.  Professional traders risk a small amount of money on their equity on one trade.

34.  Professional traders focus on limiting risk and protecting capital.

35.  In the financial markets heroes get crushed.

36.  Stick to your trading rules and you will never blow up your trading account.

37.  The market can reinforce bad habits.

38.  Take personal responsibility for each trade.

39.  Amateur traders think about how much money they can make on each trade.  Professional traders think about how much money they can lose.

40.  At some point all traders realize that no one can tell them exactly what is going to happen next in the market.

41.Losing trades don’t diminish you as a person. You’re also not your winning trades. They are just by-products of the business you’re in.

42.Act in your best interest – placing a trade because you’re afraid of missing out on a big move is NOT acting in your best interest.

43.Flawless execution comes from forming a habit. A habit is formed when it is repeated over and over again. Start practicing.

44.Don’t let personal/external factors affect the trading for thou judgment is clouded. Let the market show you what to do. Always.

45.Make sure your trading goals are 1) realistic, 2) attainable, 3) measurable. If they don’t meet these criteria, then the goal is nothing.

46.You want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point—which is typically where you will set your stop when you buy a breakout. (In case you ever wondered why you get stopped out on a lot of “failed” breakouts).

47.Amateur traders always think, “How much money can I make on this trade!” Professional traders always think, “How much money can I lose on this trade?” The trader who controls his or her risk takes money from the trader whose head is in the clouds.

48.. Siphoning out your trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business and not a place to seek thrills. If you want an adventure, go live in Minnesota for a winter. If you want excitement, deliberately forget your anniversary. Just don’t trade.Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.

49.

50.Averaging down on a position is like a sinking ship deliberately taking on more water.

51.You Need MONEY -MIND-METHOD & Target to get success in Trading.If u miss any one of them…its my challenge to anybody in World …U will never ever be succesful !!

Updated at 22:45/07th Sept/Baroda

Trading Wisdom from Market Wizards

  
  Education
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Michael Marcus

“The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone. First, the fundamentals should suggest that there is an imbalance of supply and demand, which could result in a major move. Second, the chart must show that the market is moving in the direction that hte fundamentals suggest. Third, when news comes out, the market should act in a way that reflects the right psychological tone. For example, a bull market should shrug off bearish news. If you can restrict your activity to only those types of trades, you have to make money, in any market, under any circumstances.”

“I think to be in the upper echelon of successful traders requires an innate skill, a gift. It’s just like being a great violinist. But to be a competent trader and make money is a skill you can learn.”

“Perhaps the most important rule is to hold on to your winners and cut your losers. Both are equally important. If you don’t stay with your winners, you are not going to be able to pay for the losers.”

Bruce Kovner

“The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of nonspeculative activity, the greater the significance of technical breakouts.”

On asking which is better, technical analysis or fundamental analysis, he answered, “That is like asking a doctor whether he would prefer treating a patient with diagnostics or with a chart monitoring his condition. You need both. But, if anything, the fundamentals are more important now. In the 1970s, it was a lot easier to make money using technical anaylsis alone. There were far fewer false breakouts. Nowadays, everybody is a chartist, and there are a huge number of technical trading systems. I think that change has made it much harder for the technical trader.”

Advice to novice traders: “First, I would say that risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least half.” “They personalize the market. A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not. Whenever a trader says, “I wish,” or “I hope,” he is engaging in a destructive way of thinking because it takes attention away from the diagnostic process.”

Richard Dennis

“when you start, you ought to be as bad a trader as you are ever going to be.”

“I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80 percent as good as what we taught people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.”

“my research on individual stocks shows that price fluctuations are closer to random than they are in commodities. Demonstrably, commodities are trending and, arguably, stocks are random.”

“There will come a day when easily discovered and lightly conceived trend-following systems no longer work. It is going to be harder to develop good systems.”

“The secret is being as short term or as long term as you can stand, depending on your trading style. It is the imtermediate term that picks up the vast majority of trend followers. The best strategy is to avoid the middle like the plague.” (more…)

Key to winning at trading

  
  Education
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key-asrThe real secret to making money in the markets is simply by having bigger winners than losses. A robust system may only have a 50/50 win rate but the half that are winners are much bigger than the other half that are losers. That is the key to winning at trading, not stock picking, not some secret formula that will get you in at the bottom and out at the top. Winning traders simply have small losses when they are wrong and big wins when they are right. They don’t have to be right every time they just have to be right big and wrong small. It makes no difference what method you use to achieve this you just have to be consistent in your method once you have found a winning one.

 

27 Motivational Quotes for Traders

  
  Education
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1. IF A TRADER DOES NOT UNDERSTAND WHAT HAPPENS TO HIM PSYCHOLOGICALLY WHILE IN A TRADE, HE IS DOOMED TO LOSE UNTIL HE DOES OR HE RUNS OUT OF MONEY.
2. THE MARKET PAYS YOU TO BE DISCIPLINED.
3. BE DISCIPLINED EVERY DAY, EVERY TRADE AND THE MARKET WILL REWARD YOU.
4. ALWAYS LOWER YOUR TRADE SIZE WHEN YOURE TRADING POORLY.
5. NEVER TURN A WINNER INTO A LOSER.
6. YOU’RE BIGGEST LOSER CANNOT EXCEED YOUR BIGGEST WINNER.
7. DEVELOP A METHODOLOGY AND STICK WITH IT.
8. BE YOURSELF. DON’T TRY TO BE SOMEONE ELSE.
9. YOU ALWAYS WANT TO BE ABLE TO COME BACK AND PLAY THE NEXT DAY.
10. EARN THE RIGHT TO TRADE BIGGER.
11. GET OUT OF YOUR LOSERS.
12. THE FIRST LOSS IS THE BEST LOSS.
13. DON’T HOPE AND PRAY.
14. DON’T SPECULATE.
15. NEVER TAKE A BIG LOSS.
16. HIT SINGLES NOT HOME RUNS.
17. CONSISTENCY BUILDS CONFIDENCE.
18. LEARN TO SWEAT OUT YOUR WINNERS.
19. MAKE THE SAME TYPES OF TRADES OVER AND OVER AGAIN.
20. BE A BRICKLAYER.
21. DON’T OVER ANALYZE.
22. ALL TRADERS ARE EQUAL IN THE EYES OF THE MARKET.
23. IT’S THE MARKET ITSELF.
24. ITS BORING. ITS A JOB. PATIENCE.
25. 70% OF THE MONEY FLOWING COMES FROM INSTITUTIONAL INVESTORS.
26. STRONG VOLUME IS 150% OF NORMAL VOLUME.
27. TRADE WHAT YOU SEE, NOT WHAT YOU THINK.

40 Rules for Traders

  
  Education
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1. Trading is simple, but it is not easy.
2.  When you get into a trade watch for the signs that you might be wrong.
3.  Trading should be boring.
4.  Amateur traders turn into professional traders once they stop looking for the “next great indicator.”
5.  You are trading other traders, not stocks or futures contracts.
6.  Be very aware of your own emotions.
7.  Watch yourself for too much excitement.
8.  Don’t overtrade.
9.  If you come into trading with the idea of making big money you are doomed.
10.  Don’t focus on the money.
11.  Do not impose your will on the market.
12.  The best way to minimize risk is to not trade when it is not time to trade. 
13.  There is no need to trade five days a week.  
14.  Refuse to damage your capital.
15.  Stay relaxed.

16.  Never let a day trade turn into an overnight trade.17.  Keep winners as long as they are moving your way.
18.  Don’t overweight your trades.
19.  There is no logical reason to hesitate in taking a stop.
20.  Professional traders take losses because they trust themselves to do what is right.
21.  Once you take a loss, forget about it and move on.
22.  Find out what loss parameters work best for your setup and adjust them accordingly.
23.  Get a feel for market direction by “drilling down” (looking at multiple time frames).
24.  Develop confidence by knowing and executing your trade setups the same way every time.
25.  Don’t be ridiculous and stupid by adding to losers.
26.  Try to enter a full size position right away.
27.  Ring the register and scale out of your position.
28.  Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment.
29.  You want to own the stock before it breaks out and sell when amateurs are getting in after the move.
30.  Embracing your opinion leads to financial ruin.
31.  Discipline is not learned until you wipe out a trading account.
32.  Siphon off your trading profits each month and stick them in a money market account.
33.  Professional traders risk a small amount of money on their equity on one trade.
34.  Professional traders focus on limiting risk and protecting capital.
35.  In the financial markets heroes get crushed.
36.  Stick to your trading rules and you will never blow up your trading account.
37.  The market can reinforce bad habits.
38.  Take personal responsibility for each trade.
39.  Amateur traders think about how much money they can make on each trade.  Professional traders think about how much money they can lose.
40.  At some point all traders realize that no one can tell them exactly what is going to happen next in the market.

Cut Your Losers

  
  Education
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A big debate among traders is whether to sell your losing stocks or hold onto them. Obviously, dependent on both the short and long-term outlook of a stock each side could have a winning argument.

Whether there is a right or wrong answer, when solely using technical analysis for your stock picking analysis, YOU MUST ALWAYS SELL YOUR LOSERS.

The great thing about technical analysis is that it takes emotion out of trading; however, emotion will always be there for other traders. That is why stocks can easily dip or jump higher in a single day – generally it is a reaction to a tangible action that just happened.

When executing trades through the signals of technical analysis, there are always stop points or places where the trade is consider a failure . For the most part, that point of interest is determined by recent price action of a stock. Learn more about the art of stops.

Technical analysis all about using the setup that gives the trader the highest probability of success. Once that setup is broken, your original probability is out the window. Get it?

Basically once your stock dips below the “failure” point the criteria that you essentially bought the stock on no longer stands. Now you are just swinging into the wind hoping for the stock to come back.

Instead I recommend you cut your losses and move on to the next trade. It’s all about keeping the odds in your favor.

Accepting Losses?

  
  Education
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acceptinglossThe 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 cent, and your kids will not have milk, and on, and on.

 Markets need losers so they can make money in this zero-minus-sum game.

 But please … do remember that taking an acceptable risk reward ratio position and being wrong is not  losing!

 Whether you win or lose, you should always strive to remain at a comfortable emotional state. Building a
 proper plan is enormously helpful in getting you to do just that.

 Many people know what to do; yet very few are able to do what they know! It is the rules that force one
 to take the proper actions.

 Losers often think that the rules are made for others. Think that they are not for you?

 Think again!

 Fight the rules and you will have a very short career! 

 The stock markets can be a great place to turn your savings into wealth. 

 On the other hand, if you do not keep the fundamental investment rules and do not follow certain
 simple stock investing basics, you can lose your shirt. 

 Anirudh sethi says that IF:  (more…)

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