Archives of “losing streak” tag

rss

Timeless Trading Wisdom

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #

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.

Ed Seykota-Quotes

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

If you can’t take a small loss, sooner or later you will take the mother of all losses.

There are old traders and there are bold traders, but there are very few old, bold traders.

Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.

I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities.

The elements of good trading are: 1. Cutting losses, 2. Cutting losses, and 3. Cutting losses. If you can follow these three rules, you may have a chance.

Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.

I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues. (more…)

Bill Lipschutz-Trading Quotes

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

Missing an opportunity is as bad as being on the wrong side of a trade. Some people say (after they have the opportunity to realize a profit) “I was only playing with the market’s money.” That’s the most ridiculous thing I ever heard.

When you’re 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 size helps achieve that goal.

I don’t have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don’t think you can consistently be a winner trading if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money by being right only 20 to 30 percent of the time.

Successful traders constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? Courage is a quality important to excel as a trader. It’s not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and stay with it.

It’s very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you’re doing if you’re a successful trader.

So many people want the positive rewards of being a successful trader without being willing to go through the commitment and pain. And there’s a lot of pain.

Avoid the temptation of wanting to be completely right.

Bill Lipschutz :Trading Quotes

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

 

Missing an opportunity is as bad as being on the wrong side of a trade. Some people say (after they have the opportunity to realize a profit) “I was only playing with the market’s money.” That’s the most ridiculous thing I ever heard.

When you’re 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 size helps achieve that goal.

I don’t have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don’t think you can consistently be a winner trading if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money by being right only 20 to 30 percent of the time.

Successful traders constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? Courage is a quality important to excel as a trader. It’s not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and stay with it.

It’s very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you’re doing if you’re a successful trader.

So many people want the positive rewards of being a successful trader without being willing to go through the commitment and pain. And there’s a lot of pain.

Avoid the temptation of wanting to be completely right.


Traders Psychological TEST

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Paul Farrell observes that 95% of traders don’t make it. 80% of all day traders lose money. One study found active investors turn over their portfolios excessively (258% annually) but made less than 12% on their money. Passive buy-and-hold investors with only 2% portfolio turnover had significantly better returns.

And, most day traders suffer negative health consequences from their hyper active market moves.

To find out what your trading instincts mean — to grade your own Traders Psychological Profile — answer the following questions Yes or N:

Traders Psychological Profile
Y N You’ve tried more than one new investment strategy this year
Y N Feel you’re buying and selling funds at the wrong time
Y N Rarely open up to anybody for feedback about your losses
Y N Subscribe to two or more newsletters, feel overwhelmed
Y N Can count on one hand all the good laughs this week
Y N Have a lingering resentment about someone or something
Y N You love cable news, but need more time to trade
Y N Rarely break a sweat when exercising the past few weeks
Y N Wonder whether you bet too much on recent investments
Y N Need more than three caffeine and alcohol drinks a day
Y N Feel “something” keeps you from making more money
Y N Frequently don’t trust your instincts or your strategy
Y N You’ve had a major family or personal loss recently
Y N Believe losses are caused by the market manipulators
Y N You’re overweight and snack often on comfort food
Y N Fear your future trades may fail due to a losing streak
Y N Diet and sleep are disturbed by worries about money
Y N Your retirement portfolio’s not growing fast enough
Y N No vacation in a year, and lack an active social life
Y N Nothing (or everything) interferes with making money

 

Add up the number of Yes answers. Farrell notes that if your total number of “yes” answers is six or more, then day trading is too stressful and risky for you.

The alternative to active trading is intelligent asset allocation. At the very least, he advises that you segregate your “untouchable” retirement money . . .

3 Key Lessons For All Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

Don’t Confuse the Concepts of Winning and Losing Trades with Good and Bad Trades
A good trade can lose money, and a bad trade can make money. 
Even the best trading processes will lose a certain percentage of the time. There is no way of knowing a priori which individual trade will make money. As long as a trade adhered to a process with a positive edge, it is a good trade, regardless of whether it wins or loses because if similar trades are repeated multiple times, they will come out ahead. Conversely, a trade that is taken as a gamble is a bad trade regardless of whether it wins or loses because over time such trades will lose money.
If You Are Out of Sync with the Markets, Trying Harder Won’t Help
When trading is going badly, trying harder is often likely to make matters even worse. If you are in a losing streak, the best action may be to step away from the markets. Clark advises that the best way to handle a losing streak is to liquidate everything and take a vacation. A physical break can serve to interrupt the downward spiral and loss of confidence that can develop during losing periods. Clark further advises that when trading is resumed, the size should be kept small until confidence is regained.
The Road to Success Is Paved with Mistakes
Ray Dalio, the founder of the world’s largest hedge fund, strongly believes that learning from mistakes is essential to improvement and ultimate success. Each mistake, if recognized and acted upon, provides an opportunity for improving a trading approach. Most traders would benefit by writing down each mistake, the implied lesson, and the intended change in the trading process. Such a trading log can be periodically reviewed for reinforcement. Trading mistakes cannot be avoided, but repeating the same mistakes can be, and doing so is often the difference between success and failure.

Trading Wisdom for Traders

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #

This exchange with a gentleman named Ed Seykota, who turned in a healthy 250,000 percent return for his clients over sixteen years, caught my eye:

What are the elements of good trading?
The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.
How do you handle a losing streak?
I handle losing streaks by trimming down my activity. I just wait it out. Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.

 A little later in the interview, there was this:

What are the trading rules you live by?
a. Cut losses.
b. Ride winners.
c. Keep bets small.
d. Follow the rules without question.
e. Know when to break the rules.
Your last two rules are cute because they are contradictory. Seriously now, which do you believe: Follow the rules, or know when to break the rules?
I believe both. Mostly I follow the rules. As I keep studying the markets, I sometimes find a new rule which breaks and then replaces a previous rule. Sometimes I get to a personal breakpoint. When that happens, I just get out of the markets altogether and take a vacation until I feel that I am ready to follow the rules again. Perhaps some day, I will have a more explicit rule for breaking rules.

 Never underestimate the importance of psychology and attitude as crucial elements of successful trading.

Go to top