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The story of 2 monks and the power of letting go

  
  Education
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I believed you have heard of many versions of the story about 2 monks. No? Let me refresh your memory, and explain to you how it is applicable to trading.

There were two Buddhist monks walking along the bank of a river, making their way to back to the temple.

As they were walking, they came across a beautiful lady standing at the side of the river. She stopped them and asked if one of them is willing to help her across the river. The junior monk did not bulge but the senior monk without any doubt, carried her on his back and across the river. The senior monk put her down on the other side and she thanked him profusely and hurried off. The junior monk was taken aback by the gesture but kept to himself. The senior monk returned and they carried on with the journey.

As they walked, the junior monk kept brooding about the incident until it was unbearable and broke the silence, “why did you carry that woman across the river? Knowing that our religion forbid us to touch women!”

The senior monk replied peacefully, “I put her down a moment ago and you are still carrying her.” (more…)

Jesse Livermore’s trading rules

  
  Education
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Lesson Number One: Cut your losses quickly.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. If a trader doesn’t know his exit before he takes the entry, he might as well go to the racetrack or casino where at least the odds can be quantified.

Lesson Number Two: Confirm your judgment before going all in.

Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed. Once the stock was traveling in the direction he desired, Livermore would pile on rapidly to maximize the returns.

There are several ways to buy more in a winning position — pyramiding up, buying in thirds at predetermined prices, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade –  never when it goes against you.

Lesson Number Three: Watch leading stocks for the best action.

Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game.

Lesson Number Four: Let profits ride until price action dictates otherwise.

“It never was my thinking that made the big money for me. It always was my sitting.”

One method that satisfies the desire for profit and subdues the fear of a losing trade is to take one half of your profit off at a predetermined level, put a stop at breakeven on the rest, and let it play out without micromanaging the position. (more…)

Nicolas Darvas Quotes

  
  Education
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Discipline:
“I knew now that I had to keep rigidly to the system I had carved out for myself.”
Risk/Reward:
“I was successful in taking larger profits than losses in proportion to the amounts invested.”
Exiting profitable trades:
“I decided to let my stop-loss decide.”(Speaking on when to exit an up trending stock)
Bear Markets
“I also learned to stay out of bear markets unless my individual stocks remain in their boxes or advance.” (more…)

DAY TRADING LESSONS

  
  Education
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daytradinglessons-update

  • Trading is a continuous learning process

  • Don’t trade without a plan. Be as prepared as possible. Don’t try to be right
  • Emotion is a much bigger influence in stock prices than any other factor
  • The market reacts more to sentiment than facts. Herd mentality rules
  • Sell into strength and buy into weakness
  • Market always rewards minority, not the crowd. The trick to figure out if the mass perception is wrong and WHEN it will be proved to be wrong.
  • Technical setups and money management are more important than fundamental catalysts when trading
  • Always ask: What beliefs are you acting upon? What is the basis for those beliefs? Why do you have those beliefs now? Would those beliefs be different if your recent gain/loss record had been reversed? Can you clearly enumerate what could happen that would cause you to change your mind?”
  • Extreme emotions cause extreme pain. I’ve learned how not to get overly bullish or bearish
  • Be mindful of higher trading volume on down days prior to a future catalyst as bad news can and often does leaks out
  • Take responsibility for your own trading
  • Cut your losses, let your winners run, and this is more easily said than done
  • If you can’t focus, you can’t trade. Be in the zone or stay sidelined
  • Buy below value and well below value if possible
  • Being flexible can be fruitful
  • Let the market come to me and don’t force trades
  • It is never “different” this time
  • Just more……….very soon ,Till then just read these and learn something new.
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    • Ten Ingredients to become A Great Trader

      
      Education
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    It is all a game of risk management, mind, and a robust system. Everything else is just noise. 

    1. Passion for trading, only passion can fuel the work ethic needed to do the hard work that leads to success.
    2. Goal oriented traders succeed, if you know why you are trading and where it leads you may just get there.
    3. Perseverance: It is hard to lose if you never quit.
    4. Resiliency: The ability to come back from losses may be the secret to trading success.
    5. Back testing systems and methods before trading them speeds up the learning curve and side steps a lot of learning through real losses. (more…)

    TRADING DISCOMFORT

      
      Education
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    Causes of Trading Discomfort

    Discomfort in trading usually comes in two forms and both have micro and macro causes.

    Monetary Discomfort – Just like it sounds, this is where you are uncomfortable because you are losing money.

    This can happen simply because you have a position with an open loss that is beyond your comfort level, or it can have more a more complex genesis.

    Are you down big for the year in your trading account?  Are you in financial trouble in your regular life?  Is the mortgage payment coming due and your trading profits are the funds you have to use to pay it?

    Control Discomfort – This where you feel discomfort not because of the monetary loss, but because the trade is “not doing what it is supposed to.”

    This could be the result of a choppy day where every trade you attempt, no matter long or short, reverses against you.

    Or once again it could be a related to larger issue.  Are you the type of person that always needs to be in control in your life?  Do you have an obsession with always being “right?”  Is the world a place that would  be better off if it listened to your opinions DAMMIT? (more…)

    Mark Douglas :Quotes

      
      Education
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    page 121

    1) Anything can happen

    2) You don’t need to know what is going to happen next in order to make money.

    3) There is a random distribution between the wins and losses for any given set of variables that define an edge.

    4) An edge is nothing more than an indication of a higher probability of one thing happining over another.

    5) Every moment in the market is unique.

    Page 185

    I AM A CONSISTENT WINNER BECAUSE:

    1) I objectively indentify my edges.

    2) I predefine the risk of every trade.

    3) I completely accept the risk or I am willing to let go of the trade.

    4) I act on my edges without reservation or hesitation.

    5) I pay myself as the market makes money available to me.

    6) I continually monitor my susceptibility for making errors.

    7) I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.

    What is important in trading

      
      Education
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    Trade with your personality

    Regardless of what has been working for other people, you have to trade a system that suits your personality. It either has to compliment your strengths, overcome your weaknesses or both. That is not to say that a system that someone else creates cannot work for you, but you have to figure our your own unique way of trading it.

    You have to have an edge

    You have to have a specific, definable edge over the market. Like with any other endeavor, if you are not skilled, you will not do well. The best traders understand the edge that they have over the markets and constantly exploit it for profit.

    Work hard, work smart

    All of the top traders worked hard to refine their technique and constantly improve themselves in order to become better traders. It is not only about putting in a lot of hours, it is also about being open to ways of improving that may seem foreign or strange at the beginning.

    No loyalty to a position

    Top traders know how to cut losses short and take profits when the target is hit. They don’t get too excited about a position and make a business decision to take the profit or take the loss, based on the parameters of their system.

    Cut your losses short, no questions asked

      
      Education
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    The majority of unskilled investors stubbornly hold onto their losses when the losses are small and reasonable. They could get out cheaply, but being emotionally involved and human, they keep waiting and hoping until their loss gets much bigger and costs them dearly.”

    William O’Neil

    The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.”

    Victor Sperandeo

    Some people say, “I can’t sell that stock because I’d be taking a loss.” If the stock is below the price you paid for it, selling doesn’t give you a loss; you already have it.

    William O’Neil

    When I became a winner I went from ‘I figured it out, therefore it can’t be wrong’ to ‘I figured it out, but if I’m wrong, I’m getting the hell out, because I want to save my money and go on to the next trade.’”

    Marty Schwartz

    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

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