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The Secret

  
  Education
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FireWalkWhat’s the secret of successful traders and how did they make the transition from clueless learner to consistent pro?When the same tools are available to anyone, why do some people out perform others?

 

The successful traders have discovered The Secret.

 

It is not the latest indicator, program or hot tipster. It is something that everyone has inside them already.

 

The Secret is believing in your method and trading it. Believing to the point of having it ingrained into your brain so that it becomes as automatic as breathing. If the charts do this, then I will do that. Trading your plan means cutting losers, riding winners, managing money and risk well. When you arrive at the point of realizing that your self-discipline can only get you so far and that the next step should be reflex trading then you will have found The Secret.

 

Having to exercise self- discipline to me means that there is still something inside you that you must fight to control. If emotions are still in control of your trading then you must find a way to turn that fear and greed into a move productive energy. Trading your method as a reflex means that there is no struggle to control wayward thoughts. (more…)

Trading Wisdom – Michael Marcus

  
  Education
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winningtradeWhat is the best thing a trader can do to increase their chances for long-term success? Market Wizard Michael Marcus gives us a glimpse with this insightful quote: “Taking advantage of potential major winning trades is not only important to the mental health of the trader but is also critical to winning. Letting winners ride is every bit as important as cutting losses short. If you don’t stay with your winners, you are not going to be able to pay for the losers. In addition to not overtrading, it is important to commit to an exit point on every trade. Protective stops are very important because they force this commitment on the trader.” True words of wisdom!

How to Set Goals for Your Trading

  
  Education
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Do you have a written goal of what you expect to make from your trading this year? 

If you do, you’re among three in 100 who have any goal in writing. Writing out your goal allows your mind to define exactly what you want from your trading.  Once you define a dollar amount you will make for the year, you can break that goal down into what you need to make each month, each week and each day on average.  Your goals should not be just monetary.  Your goals sheet should also list other areas like improving your percentage of winning trades, widening the size of your winners or reducing the size of your losers.  Another good goal is reviewing your processes daily to stay sharp.  I’m sure you can think of other areas you’d like to improve.  Write one goal down NOW while you’re thinking about it!

Goals focus our attention and our energy to give our efforts a clear direction. Without a clear direction, your efforts will not be unified and your results will not be reaching anywhere near your true potential.  Setting goals gives the trader a feeling of control over what actions to take to accomplish a goal.  This allows traders to grow beyond past limiting beliefs or fears that had previously held them back.

One of the best acronyms I have seen is to set SMART goals – take the goal you wrote down earlier, and make sure it qualifies as SMART:

S – Specific – Goals must be specific, defining exactly what you want to achieve.

M – Measurable – You must be able to measure if your goal is being achieved, to give you the clear feedback you need to stay on track. 

A – Achievable – Goals should be ambitious but they should also be attainable.  You have to possess the belief that you can achieve the goal in order to

R – Relevant – Your goal must be personally important to you in order to increase the odds that you will be driven by the goal to accomplish it.

T – Timeline – You must have a deadline date to completion, which focuses you on the steps needed and time required in order to fulfill your objective.

Monitor goals daily and change your plan if you’re not getting the results you expected.  And once you achieve your goal, celebrate your accomplishment – and then set another goal!

Patience

  
  Education
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The most difficult thing for traders to do is to sit there and wait. Why? Because, we live in a world that is on a total dopamine, hypomanic binge. This is never more clearly manifest than by those who absolutely have to be in the markets at all times, desperately need to be trading and simply cannot wait. They are human do-ings, rather than human be-ings.

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There is a wonderful advantage to waiting for the right entry and exit points. This allows you to be in a market- neutral mindset, and frees you from looking frantically for bearish or bullish views to justify your biases. Granted, you are not making money, but you are also (and much more importantly) not losing it. You are preserving capital. You can take time to reflect study, hone and refine your trading plan, adopt some healthy exercise and dietary habits, and become a stronger and more centered person. Simply waiting without stress for the right opportunity allows you to become a more rational and impartial observer.

Patience frees you from active involvement in the chaotic, and often reckless, behavior of others in the markets, and it puts you and your trading plan into a clearer perspective. It allows you to see yourself as a human be-ing, rather than a human do-ing.

When you first started trading, what did you hear constantly? Preserve your capital. You heard it, but maybe you did not listen, or did not understand. If you have no financial capital to use, you are out of the game. If you are chasing or getting in just to get in and are getting whipsawed daily; and you are losing, drip by drip, or in larger chunks, you are out of the game. If you are cutting your winners too quickly and letting your losers ride, you are out of the game.

If you wait, take time, assess the situation and then pounce like a jaguar at the right opportunity, your chances for trader longevity increase significantly. You have preserved your financial capital, and deployed it appropriately with a good risk/reward ratio.

17 Points for Traders

  
  Education
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  1. Patient with winners, and impatient with losers
  2. Making money more important than being right
  3. View TA as a picture of where traders are lining up to buy and sell
  4. Before they enter every trade they will know their profit target and/or stop exit
  5. Approach trade no.5 with the same conviction as the previous 4 losing trades
  6. Use naked charts 
  7. Comfortable making decisions with incomplete information
  8. Do not think of markets as expensive or cheap
  9. Aggressive with trade size when doing well and modest when not
  10. Realize the market will be open tomorrow
  11. Judge their trading success on anything but money (more…)

The Four Principles of Trading

  
  Education
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  1. The price has the final say. You may have an opinion on the market, but it is dangerous to marry it to your positions, as famous trader Richard Dennis explained, “You don’t get any profits from fundamental analysis; you get profit from buying and selling. So why stick with the appearance when you can go right to the reality of price and analyze it better?”

  2. Follow instead of forecast. Legendary trader Paul Tudor Jones once declared that he would never hire fundamental traders who frequently tried to outwit the market and got burned, because by the time the fundamentals become clear, the trend is over. You can never know if the next trade wins or not, so simply follow your rules and see.

  3. Preserve your capital. Since the market is impossible to forecast, all great traders agree that you must limit your losses before it gets out of hand, since they have seen a lot of intelligent traders got bruised in a market crash simply because they held on to the losers or even averaged down on the way as the price became “fundamentally” attractive.

  4. Let your winners ride. The other side of the coin is not to cut the profit too soon before it can grow large. Jesse Livermore explained, “I’ve known many men who… began buying or selling stocks when prices were at the very level which should show the greatest profit. And … they made no real money out of it.” Why? They sold too soon.

EWI Article: Blaming Market Manipulation is an Obstacle to Success

  
Analysis, Education
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The folks at EWI (Elliott Wave International) released a provoking new article today entitled:

“Blaming Market Manipulation for Losses is a Huge Obstacle to Success.”

The article encourages traders to take responsibility for losses instead of finding scape-goats to blame.

Losses may have just been the result of a bad outcome from a high-probability trade… or might have been the result of a bad trading habit like doubling down on losers or chasing a fast price move.

Mr. Prechter makes the point that “Losses are part of the game” and should be used as learning experiences.

You won’t learn if your loss was a result of random probability or a bad trading behavior if you do not analyze the loss, and instead sweep it under the rug as a painful memory.

I particularly liked the quote:

“You don’t have to be perfect to win in the markets, either; you “merely” have to be better than almost everybody else, and that’s hard enough.”

The article is actually the 4th Point in an article published years ago (not during the current market melt-up!) by Robert Prechter on what it takes to be a successful trader.

It’s brief, but thought-provoking!

Great Quotes of Mark Douglas

  
  Education
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“I know it may sound strange to many readers, but there is an inverse relationship between analysis and trading results. More analysis or being able to make distinctions in the market’s behavior will not produce better trading results. There are many traders who find themselves caught in this exasperating loop, thinking that more or better analysis is going to give them the confidence they need to do what needs to be done to achieve success. It’s what I call a trading paradox that most traders find difficult, if not impossible to reconcile, until they realize you can’t use analysis to overcome fear of being wrong or losing money. It just doesn’t work!”
-Mark Douglas

“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 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.”
-Mark Douglas (more…)

25 rules of trading discipline

  
  Education
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thoughtful-disciplined-trader
 
 
 
 
 
 
 
 

  1. The market pays you to be disciplined.
  2. 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.
  3. Always lower your trade size when you’re trading poorly.
  4. Never turn a winner into a loser.
  5. Your biggest loser cant exceed your biggest winner.
  6. Develop a methodology and stick with it. dont change methodologies from day to day.
  7. Be yourself. Dont try to be someone else.
  8. 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.
  9. 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.
  10. Get out of your losers.
  11. The first loss is the best loss.
  12. Dont hope and pray. If you do, you will lose. (more…)

Trading Wisdom – Gary Bielfeldt

  
  Education
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The most important thing is to have a method for staying with your winners and getting rid of your losers. By having thought out your objective and having a strategy for getting out in case the market trend changes, you greatly increase the potential for staying in your winning positions. The traits of a successful trader: The most important is discipline – I am sure everyone says that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courage to go into the market, and courage comes from adequate capitalization. Fourth, you must have a willingness to lose; that is also related to adequate capitalization. Fifth, you need a strong desire to win. You have to have the attitude that if a trade loses, you can handle it without any problem and come back to do the next trade. You can’t let a losing trade get to you emotionally. If a trade doesn’t look right, I get out and take a small loss.

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