Archives of “losses” tag

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Always Be Learning

  
  Education
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When you love to do something, you enjoy learning more and more about it.  Most active traders would rather trade than do just about anything else.  Do we enjoy the learning?  Depends upon how we come upon it.  When something is a core value, our fascination with learning more about it is endless.  You can’t get enough of it.  However, when we learn through painful experience, such as the hard knocks of trading, enough certainly is enough.

Losses are tough.  Errors and mistakes are bothersome.  And, yet there’s almost always a lesson in there if you remain alert to improving.  I’ve always said that mistakes are okay if you acknowledge them and learn from them.  James Joyce said, “Mistakes are portals of discovery.”

As I trade and make mistakes, I say to myself, “I don’t have to do that again.”  And I feel reassured and optimistic about the future. Of course, I do, “do that again”.  We all do.  There are certain default attitudes and positions we naturally fall prey to.  But with an attitude of learning, we do it less and less until we (hopefully) stop repeating the unhelpful thinking and behaving. (more…)

Coach Yourself as a Trader

  
  Education
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What are the three things (i.e. courses of action, strategies, resources) that you’ve found most helpful in mentoring/coaching yourself as a trader?

coach

And here is how I answered:

  • 1. Understand me. The most powerful tool I have found in life and in this specific case, the market, is what I, as a person, am capable of doing as a trader. I finally understand that personal characteristics that are engrained in my DNA will only allow me to trade successfully under specific circumstances. For example, I am much more consistent and profitable as a medium term and longer term trend trader than as a day trader (even more so on the long side). I don’t need to be everything, all the time as long as I continue to focus on the areas that bring me the greatest success. Understanding “me” has been my holy grail of understanding how to trade the market with some type of consistency and profitability.
  • 2. Learning to cut losses. It’s almost cliché but not many people can do it (in any aspect of life). I have learned to cut losses in my trading, my career, my hobby of competitive poker and everything else in life where the rule applies. Without this rule, there wouldn’t be a third rule. (more…)

Using Hope & Fear Correctly in Trading

  
  Education
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In trading most new traders allow hope and fear to dictate their trading. They have a losing trade and instead of selling it and getting out they instead hope it will come back to even allowing the loss to grow. Another error  for new traders is that when they have a winning trade they fear that the profit will disappear so they sell for a small gain and miss the big trend in their favor. When hope and fear controls the trader they end up with big losses and small gains. A formula for ruin.

Instead the rich trader is fearful of losses getting bigger so they sell quickly when losing, risking a maximum of 1% of their capital on any one trade. Rich traders are able to think clearly and trade rationally knowing exactly what they are risking, when their stop is hit, they get out. This enables them to keep all their losses small.

When a trade is immediately a winner for a rich trader they hope it will run 100 points in their favor. Rich traders enable this to be possible with a trailing stop, they do not get out of a winning trade until a key price reversal has happened that tells them that the trend is actually reversing.

Rich traders are fearful of losses growing bigger and hope that their winners will continue on a monster trend. This mindset allows  them to be on the right side of trends and avoid any huge losses. This is why the best traders in the world are trend followers and win consistently. Do you want to join their club? Then do not let fear and hope dictate your trading decisions use them correctly.

10 Things that Great Traders have Declared Independence From

  
  Education
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10 Things that Great Traders have Declared Independence From

  1. Great traders do not have to be right about any one trade, their success is based on winning more than they lose on a large amount of trades.
  2. Great traders do not need trade ideas from other traders, they trade a system and method independent of others opinions.
  3. The best traders are independent of holding on to losing trades stubbornly trying to prove they are right, they cut losses.
  4. The best traders are not prisoners of their emotions they can make clear headed decisions due to trading like it is a business not an ego trip.
  5. Rich traders became rich because they had systems that allowed winning trades to be free to run as far as they would go. They are independent of price targets.
  6. Rich traders trade independently from Blue Channels sentiment.
  7. Great traders trade charts independently of market sentiment.
  8. Great traders trade independently of talking heads on financial television.
  9. Winning traders are independent of market gurus they have proven systems and methods.
  10. Great traders are free from the risk of ruin because they never risk more than 1% to 2% of their total capital on any one trade.

Mark Douglas’s Five Fundamental Truths

  
  Education
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1.       Anything can happen.  Translated – you have no control over the market.

2.       You don’t need to know what’s going to happen next in order to make money.  You don’t need to be psychic, or try to predict the market.  This is not to say that you cannot predict what the market will do next and be correct, only that you don’t have to, and that by trying to predict you shackle yourself to ‘the need to be right’ and the associated ball and chain.

3.       Wins and losses are random – You will never know when a trade will be a winner in advance, only that the conditions that define your edge are present.

4.       Your edge is nothing more than a higher probability of one thing happening over another.  Your edge is no guarantee of a winning trade, just of winning over time.

5.       Every moment in the market is unique.  Just because a similar trade won last time does not mean it will this time, and by treating each trade as totally unique you can see the truth of the trade without relating it to ‘what happened last time’.

These beauty in these theories is that they take the emphasis off any one trade, and turn your trading into a big picture endeavour.

6 Random Thoughts

  
  Education
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1) Everyone needs a “mental break” from trading once in a while. The best time to take one is during corrective markets. It helps you protect capital and confidence.

2) If you have a -50% loss, it takes a +100% gain to get it back. In other words, CUT YOUR LOSSES!

3)  If you have trouble with discipline and staying away from the market, turn off your computer and get out of your chair. If you sit in the barbershop long enough, you’ll eventually get a haircut.

4) The “fear of missing out” is the downfall of most traders.

5) Whoever said that money doesn’t buy happiness clearly didn’t know where to shop.

6) “There is nothing new on Wall Street. What has happened in the past will happen again and again and again. This is because human nature does not change, and it is human emotion that always gets in the way of human intelligence. Of this I am sure.” — Jesse Livermore

Cut Your Losers

  
  Education
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A big debate among traders is whether to sell your losing stocks or hold onto them. Obviously, dependent on both the short and long-term outlook of a stock each side could have a winning argument.

Whether there is a right or wrong answer, when solely using technical analysis for your stock picking analysis, YOU MUST ALWAYS SELL YOUR LOSERS.

The great thing about technical analysis is that it takes emotion out of trading; however, emotion will always be there for other traders. That is why stocks can easily dip or jump higher in a single day – generally it is a reaction to a tangible action that just happened.

When executing trades through the signals of technical analysis, there are always stop points or places where the trade is consider a failure . For the most part, that point of interest is determined by recent price action of a stock. Learn more about the art of stops.

Technical analysis all about using the setup that gives the trader the highest probability of success. Once that setup is broken, your original probability is out the window. Get it?

Basically once your stock dips below the “failure” point the criteria that you essentially bought the stock on no longer stands. Now you are just swinging into the wind hoping for the stock to come back.

Instead I recommend you cut your losses and move on to the next trade. It’s all about keeping the odds in your favor.

Your Own Trading Coach!

  
Economy, Education
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Your Own Trading Coach!We can’t control how markets move, so we can’t control whether any single trade we make will be profitable or not. But we can control how we make trades: how we enter, how we size positions, how we exit, and how we contain losses.
Having rules about all of those helps us set specific goals about the process of trading, rather than about the outcome.
The goal of your learning is to trade well, just as the goal of a pitcher is to make a good pitch. If you do that often enough, you’ll win your share of outings.

I Trade In The Zone.

  
  Education
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  1. I Trade In The Zone’. I Trade IN The Moment, IN The Present, With Total Disregard For What Others Think & Feel About Me.
  2. ‘I Trade In The Zone’. I Ignore ALLEmotions & Defensive Perspectives. I Trade; I Do, I Act From An Entirely Detached & Impartial Perspective.
  3. ‘I Trade In The Zone’. Only In The Zone Do I See The Market As It Truly Is.
  4. ‘I Trade In The Zone’. I Block Out ALL Bad Habits & Self-Limiting Beliefs Attained From My Past, My Environment & Their Surrounding Noise.
  5. ‘I Trade In The Zone’. My Mind Is Pure, Clear, Focused & Yet Empty. The product Of‘Choice’ Means I ALWAYS Can; At Will, ‘Trade In The Zone’.
  6. ‘I Trade In The Zone’. I Trade Without Ego, Never Reacting To Pain, Sorrow Or Fear. I Just Trade The Market As It Truly Is. I Am A Super Trader, I Am The Master Of My Emotions, & So I Can Trade In The Zone. ‘I TRADE IN THE ZONE’.
  7. ‘I Trade In The Zone’. Trading In MY Zone Means I Distinguish Actual Reality From My Interpretations & Projections Of Reality. I Control The Zone!
  8. ‘I Trade In The Zone’. Only In The Zone, My Centred State, Can I ‘Super Trade.’ I Flow With Trends, I Spot Reversals & Breakouts; I Cut Losses Without Hesitancy & Let My Profits Run Perpetually. ‘I Trade In The Zone’.
  9. The Zone Is Where I Live; It’s My Nirvana, My Sanctuary, My Paradise, My Heaven.
  10. I LIVE & TRADE In The Zone. The Zone Is In Me; & The Key To Enter Is Within Me Forever!

Accepting Losses?

  
  Education
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acceptinglossThe markets do not know you!

 You do not exist to them in any other form than as the other side of a transaction.

 They do not care if it is your last cent, and your kids will not have milk, and on, and on.

 Markets need losers so they can make money in this zero-minus-sum game.

 But please … do remember that taking an acceptable risk reward ratio position and being wrong is not  losing!

 Whether you win or lose, you should always strive to remain at a comfortable emotional state. Building a
 proper plan is enormously helpful in getting you to do just that.

 Many people know what to do; yet very few are able to do what they know! It is the rules that force one
 to take the proper actions.

 Losers often think that the rules are made for others. Think that they are not for you?

 Think again!

 Fight the rules and you will have a very short career! 

 The stock markets can be a great place to turn your savings into wealth. 

 On the other hand, if you do not keep the fundamental investment rules and do not follow certain
 simple stock investing basics, you can lose your shirt. 

 Anirudh sethi says that IF:  (more…)

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