Archives of “losses” tag

rss

The Perfect Trader

  
  Education
#  #  #  #  #  #  #

The Perfect Trader is patient with entries and exits, they are focused on what works not personal opinions. They do not worry about missed trades, the Perfect Trader does not boast while winning and does not become depressed while losing. They are never too proud to admit when they are wrong and exit their trade.  They do not give unsolicited advice to other traders because they know everyone trades their own system and their own plan.  They are not angered by the market action with losses because they take full responsibility for all their trades. They keep a detailed record of all their trades to learn from winners and losers.  They love trading and never stop learning and getting better. The Perfect Trader always protects their capital through risk management, always trusts in their methods, always has faith in themselves and method,  and always perseveres.

 

Good Vs. Great Trading

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

Good traders are able to identify opportunities in the market, plan trades, execute trades, and manage trades at a reasonable level. A good trader identifies the opportunity, plans the trade, and executes the trade. He takes his losses with discipline. One might think that great traders are similar to good traders but just better. The reality is that great traders are distinctly different from good traders. The difference is not merely a difference in measure but a difference in kind.

Great trading is actually much closer to gambling. One of the key differences between great trading and good trading is that great traders don’t just play the odds: great traders play the unknown. The market simply isn’t predictable enough – enough of the time — to allow for the type of returns that great traders seek. So, great traders are much more likely to be going out into that unknown space. This seeking out the unknown always involves a cost. The cost for greatness is the potential for loss, even significant loss. A great trader will typically take more risks. The risks could involve taking trades with higher uncertainties (less confirmation), higher risk per trade (giving a trade more room), and in general just a higher level of risk. This increased level of risk taking is balanced by increased trading skill.

The problem with trading just trading well is that the game, the trading game, is really close to a zero sum game, even when played perfectly. The focus on limiting risk tends to ignore the reality that every business has to make a profit to survive. The problem with trying to avoid risks is that it tends to push the game to such a competitive level such that the trader must trade at a near perfect level just to break even and nobody can trade perfectly forever. Eventually mistakes are made and losses occur. Great traders are more creative. They move laterally and find creative solutions. Great traders don’t really compete against others. It is more of a dance. Instead of playing the games against others, they make up their own game. (more…)

The Ten Best Things Ed Seykota Ever Said.

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

Arguably one of the greatest traders of all time with his trend following system.

Charles Faulkner tells a story about Seykota’s finely honed intuition when it comes to trading: I am reminded of an experience that Ed Seykota shared with a group. He said that when he looks at a market, that everyone else thinks has exhausted its up trend, that is often when he likes to get in. When I asked him how he made this determination, he said he just puts the chart on the other side of the room and if it looked like it was going up, then he would buy it… Of course this trade was seen through the eyes of someone with deep insight into the market behavior

The Ten Best Things Ed Seykota Ever Said:

Psychology

“To avoid whipsaw losses, stop trading.”

“It can be very expensive to try to convince the markets you are right.”

“A fish at one with the water sees nothing between himself and his prey. A trader at one with his feelings feels nothing between himself and executing his method.”

Risk Management

“The elements of good trading are cutting losses, cutting losses, and cutting losses.”

“Here’s the essence of risk management: Risk no more than you can afford to lose, and also risk enough so that a win is meaningful. If there is no such amount, don’t play.”

“In your recipe for success, don’t forget commitment – and a deep belief in the inevitability of your success.”

Trading System

“The trend is your friend except at the end when it bends.”

“If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right.”

“Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible.”

“I don’t predict a nonexisting future.”

Ed Seykota is a legend in the trend following community and has returns that would make Bernie Madoff  jealous, because his are real. If you can fully grasp what Ed is saying in these quotes it will improve your trading dramatically.

28 questions that every trader should answer honestly…

  
  Education
#  #  #  #  #  #  #  #  #

Do you know your Art of Trading28-QUESTIONS
Do you  have a trading plan
Do you think in terms of probabilities
Do you know which time frame fits your psychology
Do you cut your losses
Do you define your Risk
Do you add to your losing Position (more…)

Four Stages Of Awareness in Trading

  
  Education
#  #  #  #  #  #

Have you ever noticed that awareness is the first step toward future growth? If you want to improve in any area, read on below to understand the four stages of awareness as they relate to good trading.

The learning curve in any endeavor involves four stages:

Unconscious incompetence (where the trader has no idea how much he doesn’t know about trading)
Conscious incompetence (where the traders realizes after initial losses that he has a lot to learn)
Conscious competence (where the trader has developed and is now doing well as long as he works his system and its rules)
Unconscious competence (where the trader has mastered the rules and also knows when to break the rules as conditions change, in a complete flow with the markets based on great experience)

Useful Thoughts To Counter Fear

  
  Education
#  #  #  #  #  #  #

– Losses are a simple cost of doing business
– Since you always limit your lose to an amount of your account can withstand, there is nothing to fear.
– You have the courage to do whatever it takes to succeed at trading
– Each Trade is but one of many
– You keep your focus in the present because this is where the action is
– The potential profits are worth the risk
– Trading is about money, it’s not about your survival.
– Trading is only one way in which you can make money.
– You learn and grow stronger with each trading experience
– The future of your trading is bright.

Livermores Seven Trading Lessons

  
  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.

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.

Lesson Number Five: Buy all-time new highs.

The psychological merits of buying all-time or 52-week highs are immense and shouldn’t be discounted as a part of your overall strategy. (more…)

Losses

  
  Education
#  #  #  #  #  #  #  #  #

losses-ASRLosses are a simple cost of doing business. Don’t try to justify a bad trade by convincing yourself that it will sooner or later turn into a good trade. Accept losses easily!  Successful traders are able to ride through downturn periods. The confidence in their methods reassures them about their future success. 
The markets offer endless and plentiful possibilities. Missed opportunities  exist only in your mind. Prices keep changing and generate other opportunities. The goal of trading is make a net profit after a sequence of trades. It is, therefore, necessary to accept some losses and to look forward without punishing oneself. 

Losers Average Losers

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

There is a famous picture of Paul Tudor Jones relaxing in his office with his feet kicked up. A single sheet of loose-leaf paper is tacked on the wall behind him with the simple phrase written out in black marker: “Losers Average Losers”. Trite meaningless talk? Not so fast.

Famed trader Jesse Livermore warned 100 years ago against averaging losses. For example, you buy a stock at 50, and two or three days later if you can buy it at 47, you average down by buying another hundred shares, making an average price of 48.5. Having bought at 50 and being concerned over a three-point loss on a hundred shares, what rhyme or reason is there in adding another hundred shares and having the double worry when the price hits 44? At that point, there would be a $600 loss on the first hundred shares and a $300 loss on the second shares. If you are able to apply such an unsound principle, you can keep on averaging down by buying 200 at 44, then 400 at 41, 800 at 38, 1600 at 35, 3200 at 32, 6400 at 29, and so on (source: Jesse L. Livermore, How to Trade in Stocks: The Livermore Formula for Combining Time Element and Price).

Losses are a part of the game. You want no losses? You want positive returns every month? It does not work that way, that is, not unless you were lucky enough to be invested in the Bernard Madoff Ponzi-scheme which has resulted in assorted criminal convictions and a few suicides. Losses are not your problem. Its how you react to them. Ignore losses with no plan, or try to double down on your losses to recoup, and those losses will come back like a Mack truck to run over your account.

Wisdom Not to Be Ignored

Don’t frown, double down! Not smart strategy.

Escalator up, express elevator down.

You can’t win if you are not willing to lose. It’s like breathing in, but not breathing out.

Traits of a Successful Trader

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

We urge you to use this checklist for your own trading and investing preparation.  We truly feel that these traits are very important for you to understand.  These trader traits coupled with the proper psychology can make a huge positive difference in your overall trading performance.     

•  The ability to act on your decisions.

•  The ability to accept responsibility for your actions.

•  You must have emotional detachment from the markets.

•  The ability to accept risk and take losses (you’ll never be right 100% of the time). (more…)

Go to top