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HOPE

  
  Education
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While it may sound innocent enough, hope can be the great profit-killer for traders and investors alike. Hope is a dangerous emotion because it can cause irrational thinking. Hope is the reason some traders add to losing positions — because they are convinced they are correct and hope the market will eventually vindicate them. Unfortunately, the market does not operate under these rules. When you’re trading a stock based on technical analysis, the market is always right.

Before every trade you make, you must make a pact with yourself to sell the stock if it fails to do what you anticipated. If hope sneaks into the picture, prepare yourself for larger losses.

Common Mistakes for losing Money

  
  Education
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Trading is an evolutionary process. Nobody can wake up being a Master Trader. Unfortunately there is no book or magic trick that can turn you into the highly profitable trader. Although the belief and the hope to obtain those skills instantly is still in place.

The statistics say that only the ones with the self-dedication and discipline succeed in this business.

The most common mistakes leading to losses:

-Trading against the market;

-No trade potential;

-No serious buyers or sellers in the stock;

-Wide stop-loss;

-Fear of loss.

Traders should stay calm during the trading, this helps to observe and analyze the situation on the market much better, see some small details and make a competent decision.

Panic, stress or fear, always lead to mistakes.

One of the serious problems in trading is rush and mania to be present on the market all the times, opening positions when there is no potential for a trade or where the market is either flat or going the other direction.

Tips to resolve the mistakes:

1. Always look at the market. If there is no clear picture of the market’s behavior, don’t risk your money.

2. Always look at a trade potential. If you look at the daily charts and see that the daily bars are just 20 cents long, then look for other stocks, where the potential is at least 40 cents.

3. Always look either at the Open Book or Market Maker window and Tape. If you don’t see any order flow on the Tape or the order sizes are small (less than a 1000 shares), then don’t enter the trade.

4. Always know where you are going to place you stop-loss order. If it is more than 10 cents away from your entry point, don’t enter the trade.

5. If you’re just not sure, or if the situation is uncertain, don’t enter the trade.

Following these tips requires some work and changes to our habits. It is not easy at all! We always hear sayings that the trader should be disciplined. What it actually means is changing your old habits and training yourself to have new ones. It is not comfortable, but it brings positive results, which will be noticeable on your month-end P/L report.

FEAR

  
  Education
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How to prevent Fear in trading ?

you have decide to trade a particular system. you get an entry signal, and put on the trade. You put in your protective stop, and you know what will be your signal or target for exit. There is nothing more to you need to do or worry about. The market will do the rest for you. You are along for the ride, and you know when to get out. So there is nothing to be fearful about …

“There is hardly anything productive about worry or fear when you cant do anything about the circumstances” by Buzz Aldrin

Fear is an emotion. It is created by us and therefore we can uncreated it. Fear is created when we think that our trade will lose a lot of money or things that will prevent our trade from losing. The keyword is think which is thoughts in our mind. When you keep on thinking of the thoughts of losing money and fearful of it. STOP!! Take a deep breath to break your connection. Then ask yourself, “Is this probable?” Continue to challenge the thought by asking, “What are the probabilities right now?” Then choose to take control of your thoughts and think term of the current probabilities.
Fear will lead you to disaster if you do not know how to release it. Another way to release fear is to have a shower to calm down yourself. (more…)

Emotions & Trading

  
  Education
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he hardest thing about trading is not the math, the method, or the stock picking. It is dealing with the emotions that arise with trading itself. From the stress of actually entering a trade, to the fear of losing the paper profits that you are holding in a winning trade,  there are many different types of stress. How you deal with those emotions will determine your success more than any one thing.

Here are some examples of emotional equations to better understand why you feel certain emotions strongly in your trading:

Losing Money and failing to learn to Trade Better results in Despair. 

Do not despair look at your losses as part of doing business and as paying tuition fees to the markets. If you are getting better at trading do not despair even if you are losing money.

When Expectations clash with Reality it causes Disappointment.

Enter trading with realistic expectations. You can realistically expect 20%-35% annual returns on capital with great trading. More than that is possible but unlikely. (more…)

Traders Daily Lessons

  
  Education
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Have the courage to say no.
Have the courage to face the truth.
Have the courage to do the right thing because it is right.
– W. Clement Stone

An inner dialogue typically reinforces the way you think. So the goal is to consciously expose yourself to thoughts that ultimately will positively impact your trading. Through the use of repetition you can considerably strengthen a positive attitude and sound trading behavior. The beauty of it is the simplicity of the method. It’s entirely up to you which trading mantras you want to adhere to. Here are a few that I strongly believe in and that characterize my thinking as a trader:

  • Kill your greed
  • Isolate yourself from the opinions of others
  • Never chase stocks
  • Always strive for emotional detachment
  • Focus on proper execution
  • There is never a shortage of opportunities
  • Never make excuses
  • Stay in control
  • Don’t compare yourself to others
  • Always use stop losses
  • Standing aside is a position
  • Money comes in bunches
  • Never add to a losing position
  • Stay calm and focused
  • Don’t believe the hype
  • Cultivate independent thinking
  • Be ready for worst case scenarios
  • Nosce te ipsum – Know thyself

The Win/Loss Ratio

  
  Education
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42-21056354“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. … (more…)

7 Mantras For Successful Trading

  
  Education
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1. Losing traders fear losses and crave profits. Winning traders eliminate both fear and greed. 
Great traders experienced a lot of losses and drawdowns in their lifes, so they don’t fear them. Losses are already familiar to them.
They know, that the biggest enemy of a trader are emotions. So the best attitude is not to be influenced by fear of loss or desire for profits. The more you fear something, the more you’ll experience it. The more you desire something, the less benefits you’ll have from it. 
If you’re scared of driving at high speeds, Formula 1 career will never be a good option for you. If you’re scared of losses, trading will also never be a activity suited for you. 
2. Losing traders care where the market will move in an hour, today or tomorrow. Winning traders don’t care where the market will go. 
Why manual traders are so attached to their positions or market direction? The deep psychological reason behind it, is that they’ve made the trades with their own hands and heads. So they start worrying about the outcome. The automated systematic traders on the other hand, let computer programs do the job, so they cannot blame themselves or the market for the outcome of particular trades. 
Why it is important in trading? The less you worry about the positions and about market direction, the less emotions can negatively impact your trading. 
3. Losing traders look for 100% return a month. Winning traders look for 100% return a year (without compounding). 
To achieve 100% return in a month, you have to trade with very high leverage. The most probable result trading with too high leverage is -100%. Winning traders use medium to low leverage. They may lose 30% from time to time, but with proper strategies, they are able to double the account every year. And if they combine medium leverage with the power of compounding , returns can be much higher.  (more…)

Wall of losses

  
  Education
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obstacleIf you’re in the market, one of biggest obstacles you’ll face is the wall of losses. It’s fairly difficult to deal with the markets if you are not willing to lose. It’s almost impossible. It’s like wanting to be alive, but only wanting to breathe in and not breathe out.

When you want to be right, you’re not dealing with the obstacles. Instead, you’re forcing things. When you want to make a profit out of today’s trade, even though it’s a big loser, then you’re not dealing with today’s obstacle. Enjoy the obstacle, embrace it, and be willing to accept it. If the market tells you it’s time to get out at a loss, then do so.

Costly Mistakes!

  
  Education
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Oops!!A system’s purpose is to ensure that we do not miss a breakout when a real trend comes, because missing a really strong trend is lethal – so lethal that we are willing to pay the price of many small losses, just in case the real one emerges.

Each entry doesn’t guarantee a profit, in fact, each entry likely becomes losses. However, the odds is that if you follow it consistently, in the long run, you come out ahead.

Ed Seykota’s Magic Trading System

  
  Education
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1: Do not stress about whipsaws – one good trend pays for them all.

A whipsaw is when you enter a stock, but get stopped out quickly.  In a period of whipsaws, this may happen many times.  This can be frustrating to a trader or investor, and it may cause them to change their system.  But the fact is that one good trend will pay for all of these whipsaws, and if you change your system you lose the benefit of that!

2: When you Catch a Trend, ride it to the end.

Your system must be able to jump on a trending stock (for instance, up if you are going long), but then also be able to ride that trend to the end.  Many novice traders will jump out of stocks before they are finished trending because they are scared the market has gone too far.  Let your system tell you when the trend is ending, and only exit once it does.

3: When you show a loss, give the loss a toss.

Every single successful money manager ever interviewed has said something along the lines of: “Cut your losses short”.  Get rid of your losses.  Keep your winners.  And once you have your system don’t second guess it!  Being stopped out is part of the process.

4: We know if our risk is right when we make a lot of money, but can still sleep at night.

Risk is the amount of risk per trade (the price between your entry and your stop loss), and how much your total risk is (regarding how many positions you have open at one time). (more…)

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