Archives of “losses” tag

rss

Fragile Traders vs. Anti-Fragile Traders

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


Reading Nassim Taleb’s newest book Anti-Fragile really got me thinking about how traders are broken.
Traders can become fragile and be broken in several ways:

  1. They can quit because they believe that trading successfully is impossible.
  2. They can lose half their account or all of their account and just give up.
  3. They can become emotionally traumatized by one huge loss or a string of losses and just not be able to trade any more due to the pain going forward.
  4. A trader can lose faith in them self as a trader.
  5. A trader can lose faith in their system.
  6. A trader can trade too big and blow up their account, they want to trade, they believe they can make it back but have no money.

A trader can become anti-fragile they can benefit from adversity at times by:

  1. Having 100% confidence that they will be in the 10% percentile of  consistently winning trades, it is just a matter of time.
  2. They do not give up after losing the majority of their very first account  they just accept it as paying tuition and start again this time with faith they will win.
  3. The anti-fragile trader trades small, their emotions do not bleed into their trades, each trade is just 1 of the next 100. They risk 1% of capital per trade.
  4. The successful trader identifies themselves as a successful trader, losing trades do not change who they are.
  5. The trader believes that time is on their side and draw downs are just temporary, short term losses do not change the trader’s belief in long term success.
  6. Successful traders know that their trading account is their life blood, guarding  it against big losses is their #1 priority.

Fragile traders are inevitably  broken, anti-fragile traders are not only not broken but benefit from circumstances by learning, growing, and becoming more resolved to win. Adversity makes them stronger.

Trading Truths

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #
      1. It’s all about risk management … never risk what you can’t comfortably lose.
      2. Never fall in love with a stock.
      3. To be succesfull in trading; study, understand and practice. The rest is easier.
      4. Always start by assuming your analysis is WRONG and that people much smarter and with more recent information are already positioned opposite you.
      5. Never take on a position larger than your comfort zone. (Don’t overtrade)
      6. Patience. never chase a stock.
      7. Before entering the trade very think carefully what will make you wrong, write it down clearly and put it infront of you where you trade, and when your wrong get out happy you’ve followed your trading discipline.
      8. Buy strength, sell weakness. Most traders are essentially counter-trend; most traders lose.
      9. No one ever went broke taking a profit!
      10. Once you find a good one, hang on unless of course they do you wrong.
      11. Never add to a losing position! (Unless scaling in was part of the plan).
      12. Whenever you think you’ve found the key to the lock, they’ll change the lock.
      13. Do not overtrade.
      14. Trade price not perception.
      15. Know the difference between stocks that you want to stay married to and those that are just a fling.
      16. The only sure way to make a small fortune is to start with a large one.

        17. and to paraphrase Will Rogers: Buy only stocks that will go up. Don’t buy the ones that don’t go up. “THIS is GAMBLING.”

      17. Cut your losses quickly and you may have a chance. (more…)

      Two Facts

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

      anirudhsethithougts
      Iam tracking Indian Stock Market and Global Market since 1992.Yes after 17 years ..I had seen these are two real facts of Trading.

      #1: Small-range market periods lead to large-range market periods. Low volatility breeds high volatility, which in turn leads to low volatility.
      Just about the time everyone is resigned that market conditions will never change is exactly when conditions will change.
      #2: Trading is a business where you can never be right. Never. No matter what we do, our mistakes will always outnumber our correct decisions. That’s why grading ourselves on every minute` decision will come up with more of a batting average score than college test score.
      Mistakes can always outnumber correct actions… so long as correct actions outweigh mistakes. It ain’t the size of our right or wrong actions that counts: it’s how much they weigh in $$ values. Size does matter.
      The great news is, as traders we never have to be perfect. We don’t even have to be 50% perfect. We only need to maximize our wins and minimize our losses. And we only need to win once per day, more days than not to be good. Just barely profitable = the top ten percentile of our profession. Anything beyond that is outperforming 90% of the field.

      7 Trading Rules of Jesse Livermore’s

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

      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. (more…)

      Bruce Kovner's :Wisdom Thought

        
        Education
      #  #  #  #  #  #  #

      Michael Marcus 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 judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.

      Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m 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. I never think about other people who may be using the same stop, because the market shouldn’t go there if I am right.

      Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.

      If you personalize losses, you can’t trade.

      7 dirty words you can’t say while trading

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

      Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

      Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and neither do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

      Will– Phrases include: “The market will..” and “I will make money”. Once again the market does not like to be told what to do. It is the bratty kid screaming at the tops of his lungs. The word “will” relaxes your mind, similar to “should”, people use it to be lazy instead of a dark background in an otherwise light picture. You can do everything right and still lose money. That is why trading is so effective at diminishing confidence. In most every activity, if you do everything right you are going to get the desired result. Doing the “right” things is bare minimum. Of course, over time you will get paid for doing the right things but it is never when you think it should be and hardly how much you anticipated.

      Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks. (more…)

      Day Trading Methodology

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

      I have been reading the latest book from Van Tharp, Super Trader and I want to highlight this passage about daytrading methodologies:

      “For example, if you are a daytrader, open up a position and either take a small loss or get out at the end of the day. When you do that, you are not tied to the market all day, and you may find that you take small losses and get huge profits. Simplify your entry technique and concentrate on exits”

      Now, lets cross this with Jesse Livermore remarks on the speculative line of least resistance:

      “It sounds very easy to say that all you have to do is to watch the tape, establish your resistance points and be ready to trade along the line of least resistance as soon as you have determined it.”

      So, we have a powerful daytrading methodology in these two market generalizations. But JL added, “But in actual practice a man has to guard against many things, and most of all against himself – that is, against human nature.”

      Rings a bell? Maybe we should all print this post and have it by the trading desk.

      The emotions of trading

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

      When trading there are two emotions that are more common, and more dangerous, than all the rest; fear and greed.

      Fear and greed can ruin even the best trading strategies

      One moment of fear or greed can lead to a moment of madness and months of hard won profits going down the drain

      Uncontrolled emotions should not be an excuse for losses and losses should not be an excuse for uncontrolled emotions

      Remember!! Trading affects psychology as much as psychology affects trading
       

      Greed

      “You can’t feed on greed”

      • Many people think that greed is thinking that the sole aim of trading is to make money.
      • This is NOT what greed is

      Greed is trying to make money too quickly
      There are lots of ways to be greedy in trading;

      • Trading in sizes that are too large
      • Trading too frequently
      • Having unrealistic expectations
      • Dreaming of the big hit trade, rather than steadily building your equity

      Fear

      Fear in trading has two faces;

      • Fear of loss
      • Fear of missing out

      The fear of loss compels traders to close profitable trades prematurely, meaning they miss out on potential profit
      The fear of missing out compels traders to abandon their trading strategy so they do not miss a major price move
      Fear is NOT good as it leads to overtrading and miss-timed entry and exit points
      So
      DON’T BE SCARED!!

      Ignorance, Greed, Fear and Hope

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

      Ignorance, Greed, Fear and Hope

      In the book “Reminiscences of a Stock Operator,” Edwin Lefevre writes: 
      “The speculator’s deadly enemies are: Ignorance, Greed, Fear and Hope.“

      In today’s commentary we will take a look at “Hope” and see why it is one of the four deadly enemies of successful market timing. 
      Each of us has a desire for success. That is why we use market timing in our investing. Not only to increase our gains in both bull and bear markets, but importantly to protect our capital against loss. 
      But that same desire for success can stand in the way of our ability to recognize reality, even if it is right before our eyes. All of us have a survival instinct that typically causes us to focus on good news. Bad news is avoided, or at least put on the back burner. 
      When we take a position in the market, whether bullish or bearish, we hope it will be successful. Hope can be such a powerful emotion, that when the same trading plan that told us to enter a position originally, reverses and tells us to exit immediately, our emotions may very well focus on the possibility that if we just hold on a bit longer, any loss may be erased.  (more…)

      4 Dirty Words of Trading

        
        Education
      #  #  #  #  #  #  #  #  #

      Should– Phrases include: “The market should have” and “I should have”. Those phrases are often used to socialize losses. They are a strong signal something is off. They should be used to aid you in correcting your vision not make you feel better.

      Must– Phrases include: “The market must…”, “I must make money”, or “I must trade”. The market does not have to do anything and neither do you. When you use the word “must” it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.

      Won’t– Phrases include: “The market won’t…” or “I won’t make money”. Notice a theme here? You are part of the market, you are not the market. Not getting what you expect, even if it is positive, confuses the brain. If you expect to lose and don’t it is still a bad outcome. Your brain is going through enough as it is. The market is a one way walkie talkie, you listen, it talks.

      Can’t– Phrases include: “The market can’t..” or “I can’t…” or “I can’t lose anymore”. Yes the market can, go look at a chart. Go look at a Fed day or about any chart from 2008. Not only can it happen, it does happen. There are no more once in a lifetime moves in the market. There are and always have been life changing moves. No one ever said trading was easy but at least in the case of futures someone is taking your money. If you think you can’t, you probably wont. The market will take every penny you have. If can take every penny you put at risk. Fix the problem, when you run out of money it is too late.

      Go to top