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TIMING ENTRIES AND EXITS

  
  Education
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1. Forget the news, remember the chart. No one is smart enough to know how news will affect price in every case.  The chart already knows the news is coming.

2. Execute positions based on numbers, time, and volume, not emotions.  This discipline forces the trader to distance himself from reckless gambling behavior. 

3. Remember that participants in the markets echo similar patterns over and over again based on the infallible rules of human behavior allowing the trader to take advantage of potentially profitable trades while minimizing losses. 

My Goal

  
  Education
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Technical analysis is often misunderstood as being the holy grail to making profits. What is often overlooked is its ability to warn you of impending price moves and its ability to help avoid huge losses. Applying technical analysis and using stop losses are the only way to protect your financial and mental capital. If you want to play the markets you need to stay in the game. My goal as a trader is still the same:

  • To continue to learn about the markets and price movements
  • To learn from my mistakes in order to avoid repeating them
  • To continually increase discipline
  • To be emotionally detached.

‘Price’ Makes All Markets the Same

  
  Education
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Richard Donchian blazed the trail with the straightforward notion that trading many markets at the same time with the same rules — works:

“When I first got into commodities, no one was interested in a diversified approach. There were cocoa men, cotton men, grain men … they were worlds apart. I was almost the first one who decided to look at all commodities together. Nobody before had looked at the whole picture and had taken a diversified position with the idea of cutting losses short and going with a trend.”

Don’t get hung up on the word “commodity.” His quotation is probably 60 years ago. The key is the STRATEGY, not the INSTRUMENT.

What characterizes great and successful traders

  
  Education
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  • Great traders graciously accept mistakes. They don’t need to be right all the time. Thoughts-Trading
  • Great traders focus on proper execution not on the outcome of a single trade.
  • Great traders concentrate on good risk management. They constantly manage their open positions.
  • Great traders are emotionally detached. Single trades do not affect their mood.
  • Great traders don’t compare themselves to others. They isolate themselves from the opinions of others.
  • Great traders are not afraid to buy high and sell low.  As you probably know by now the single biggest mistake a trader can make is to hold on to a losing position. Failing to cut losses quickly and letting them develop into huge losses is mentally and financially devastating. The underlying psychology which is responsible for this behavior is the ‘need to be right’ and the fear to sell at a loss. What aggravates the situation is adding to a losing position.  “Do more of the things that work and less of the things that don’t.“

  • Conclusion:Isolate yourself from the opinions of other people. Make trading decisions your own. Focus on proper execution. Have the courage to do the right thing because it is right.

    • Traders’ Discipline

      
      Education
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    Top daytraders have the discipline to follow their daytrading system rigorously, because they know that only the trades that are signaled by their system have a greater rate of success. Matching a method of trading with your personality is the only way you will ever feel comfortable in the markets. Some websites have sought to profit from day traders by offering them hot tips and stock picks for a fee.

    Day trading is an investment tactic with a relatively short investment. You need to position yourself so that you can endure long strings of losses, and maintain your day trading system.

    Trading successfully is by no means a simple matter. A day trader should treat their capital as 100% risk capital and should not have to unduly worry that the whole amount of this capital may be lost very quickly. Good day traders do not rush into trades.

    Day trading is just a numbers game. Be aware that day trading does not offer the protection of an advisor who can tell you whether a particular investment is suitable to your financial goals. Day trading is like running any other kind of business. It requires planning and expertize.

    Limiting your losses when day trading is by far more important than making big profits. Day trading is an inherently variable business. For the sophisticated investor day trading may be safe since such investors know what they are doing and are willing to absorb the risk of losing money. Online trading is quick and easy, but making money from day trading and online investing takes time.

    Risk and Loss

      
      Education
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    Risk– when it comes to life risk can be a bad thing.  It means not looking both ways before crossing the street.  Risk is like breathing when it comes to trading.  It is the only way to stay alive.  It can be toxic air or clean air know the difference before taking a deep breathe.

    Loss– losses are a part of trading they need to be handle the same way as wins, the psychology should be determined by the way it was realized more than what was realized.  The exception is big losses/risking more. You will have more control of amplitude than frequency so take advantage of it

    Accepting Loss

      
      Education
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    One of the fundamental principals of trading stocks, or anything for that matter, is; you never play with money you cannot afford to lose. You should not be trading money needed for car payments, rent, food, diapers etc. The reason for this is, no matter how sound a system or piece of advice may sound, trades often go against you. Trading money you can afford to lose means that you have money to live, some money saved for a rainy day, and some for trading.

    Now, by trading money you can afford to, or are willing to lose means just that. Even a successful trader’s account may experience dips or losses at many points. In fact, being willing to lose, or admit loss is essential to trading. (more…)

    The obstacles of the day trader are:

      
      Education
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    The obstacles of the day trader are:

    Fear – Fear causes the day trader to hesitate and freeze when positions should be entered and exited. Fear can also cause day traders to take losses,

     Doubt – Doubt causes great opportunity to be missed and causes a mind to be scattered and without firm direction.

    Greed – Greed will cause day traders to hold onto positions too long often causing profit to turn into loss.

    Hope – Hope will cloud the eyes of probability. Hope is not for day traders.

    Risk Vs Reward

      
      Education
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    Risk is a part of trading. Every trade carries a certain level of risk. Every trader must know the amount of risk that is being assumed on each trade. Knowing the amount of risk on each trade is one way to limit it and to protect your trading account. The best way to know your risk is to determine the risk-reward ratio. It is one of the most effective risk management tools used in trading.

    The risk-reward ratio is a parameter that helps a trader to determine the level of risk in a trade. It shows how much a trader is risking versus the potential reward (or profit) on a trade. While this may seem simplistic, many traders neglect taking this step and often find that their losses are very large.

    The minimum risk vs reward ratio for a good forex system should be 1:2, however a larger ratio is always better.

    How to determine the risk vs reward ratio?

    <!–[if !supportLists]–>1.       <!–[endif]–>Determine the amount of risk for the trade. This is equal to your entry price minus your stop loss price or potential exit price.

    <!–[if !supportLists]–>2.       <!–[endif]–>Determine the potential reward on the trade. Based on your analysis or system, the potential exit price minus your entry price is your reward.

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