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Random Trading Thoughts

  
  Education
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1. Do not think about making money, think about losing money – the first step toward success is accepting that losing is part of trading. You will not be right all of the time, you can not always trade your way out of a bad situation. There will be times when you simply have to walk away with a loss. The key is to keeping the losses small and manageable. When the market proves you wrong, take the loss.

2. Do not think you can average down to win – it is a logical idea, add more to a losing position with the expectation that the market must eventually go your way. Many times this strategy will work but, when it does not work, the loss may be insurmountable. The market does not eventually have to go your way.

3. Do not think that your success is entitled – you may make a great trade, pick a really great stock and have a feeling like you really have the market figured out. Forget your gloating, no one ever has the market figured out. We must always remember that we have to work as smart for the next trade as we did for the last.

4. Do not think that talent is required – making money in any trading endeavor is a small part technical skill and a big part emotional management. Learn to limit losses, let winners run and be selective with what you trade. Emotional mastery is more important than stock picking skill.

5. Do not think that you can tell the market what to do – the market does not care about you, it does not know that you want to make a profit. You are the slave, the market is your master. Be obedient and do what the market tells you to.

6. Do not think you are competing against other traders – trading success comes to those who overcome themselves, it is you and your persistent desire to break trading rules that is the ultimate adversary. What others are doing is of little consequence, only you can react to the market and achieve your success.

7. Do not think that Fear and Greed can ever be positive – in life, fear can keep us from harm, greed can give us the motivation to work hard. In the market, these two emotional forces will lead to losses. If your decisions are governed by either or both you will most certainly find that your money escapes you.

8. Do not think you will remember everything you learn – every trade provides a lesson, some valuable education on what to do and what not to do. However, it is likely that your lessons will contradict one another and lead you to forget many of them. Write down the knowledge that you accumulate, return to this trading journal so that you can retain some value from the lessons taught by the market. Remember, the market is cruel, it gives the test first and the lesson after.

9. Do not think that being right will lead to profits – you may be exactly right about what the fundamentals are and what they are worth. However, timing is everything, if your expectations for the future are ill timed, you may find yourself losing more than you can tolerate. Remember, the market can be wrong longer than you can be liquid.

10. Do not think you can overcome the laws of probability – traders tend to be gamblers when they face a loss and risk averse when the have a potential for gain. They would rather lock in a sure profit and gamble against a probable loss even if the expected value of doing so is irrational. Trading is a probability game, each decision should be made on the basis of the best expected value and not what feels best.

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

The 7 Habits of Highly Successful Traders

  
  Education
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  1. Traders must have the perseverance to stick to trading until they break through to success. Many of the best traders are just the ones that had the strength to go through the pain, learn, and keep at it until they learned to be a success. number7-asr

  2. Great traders cut losing trades short. The ability to accept that you are wrong when a price goes to a place that you were not expecting is the skill to push the ego aside and admit you are wrong.
  3. Letting a winning trade run as far as it can go in your time frame is crucial to having big enough winners to pay for all your small losing trades. 
  4. Avoiding the risk of ruin by risking only a small portion of your capital on each trade is a skill to not get arrogant and trade too big, if you risk it all enough times you will lose it all eventually. 
  5. Being reactive to actual price action instead of predictive of what price action will be  is a winning principle I have seen in many rich traders. Letting price action give you signals is trading reality, trading your beliefs about what price should be is wishful thinking.
  6. Great traders are bullish in bull markets and bearish in bear markets, until the end when then trend bends. 

  7. Great traders care more about making money more than any other thing. Proving they are right, showing off, or predicting the future is not as important as hearing the register ring.

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

Getting Comfortable with Uncertainty

  
  Education
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A trader who is comfortable with uncertainty has the capacity to stay relaxed in unclear situations and make high probability decisions with a strong degree of conviction.

As a trader, how many times have you asked yourself “Is this the right call?”
If you are like most other traders, the answer should be “nearly all the time.”
How about we break this down and think about it from a different angle.

New Perspective:
Let’s consider the possibility that it is NOT your job to make “The Right Call” but rather to make an intelligent, data-point-supported guestimate of what “The Right Call” could be and then monitor, adjust, and possibly liquidate that decision as it develops over time.

Viewing it this way takes the pressure off, doesn’t it? In fact, it may even get you more Comfortable with Making Decisions during Uncertainty.

My point is, like golf, trading is not a game of perfect. Successful traders just don’t waste their time trying to be “RIGHT;” instead they are focused on MAKING MONEY.

Top performers in any field practice their game, establish a plan and TRAIN themselves to execute when the widow of opportunity appears. So why would we think trading should be any different? In the end, winning is not about being right, it is about getting the job done.

Keep your eye on the ball and your head in the game!

Perfectionism:

  
  Education
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There is no perfection in trading as far as making money on every trade or having a perfect system. All you can hope to be perfect at, is following your system, rules, and trading plan. A winning trade should be measured as one in which you followed all your preset guidelines. Even the best traders only average about a 50%-60% win rate at best over long periods of time. The key is having bigger winners than losers, not being perfect. Like in baseball where a .300 hitter can get into the hall of fame. A .500 trader in the market can become wealthy if his wins outpace his losses.

Ten Powerful Psychological Traits of the Rich Trader

  
  Education
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Ten Powerful Psychological Traits of the Rich Trader

  1. They have the ability to admit they were wrong and get out of a trade. They know the place where price proves them wrong.
  2. They have the ability to not only close a losing trade but reverse and go in the other direction when it is called for.
  3. The rich trader is not trying to prove anything about themselves they are focused on making money.
  4. They do not fall in love with an idea, currency, commodity, or stock they will make trades based on price action.
  5. Rich traders know that the market action is their ultimate boss regardless of their opinions.
  6. No matter how sure they are about a trade they still ALWAYS manage the risk.
  7. Rich traders get more aggressive when winning and trade smaller or take a break during a losing streak.
  8. A great trader is one that can admit to anyone that they were wrong.
  9. Rich traders do not believe their own hype, they know they can not really predict the future they can only react to current reality and the probabilities.
  10. Rich traders love what they do, win or lose.

When you are trading like that, it is hard to be beaten. Time is your friend.

5-False Beliefs About Trading the Markets

  
  Education
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1) What goes up must come down and vice versa.

That’s Newton’s law, not the law of trading. And even if the market does eventully self-correct, you have no idea when it will happen. In short, there’s no point blowing up your account fighthing the tape.

2) You have to be smart to make money.

No, what you have to be is disciplined. If you want to be smart, write a book or teach at a university. If you want to make money, listen to what the market is telling you and trade to make money — not to be “right.”

3) Making money is hard.

Nope. Sorry. Making money is actually easy. Statistically, you’re going to do it about half the time. Keeping it, now that’s the hard part.

4) I have to have a high winning percentage to be profitable.

Not true. How often you are right on a trade is only half of the equation. The other half is how much do you make when you’re right and how much you lose when you’re wrong. You can remember that with this formula:

Probability (odds of it going up or down) x Magnitude (how much it goes up or down) = Profitability

5) To be successful, I have to trade without emotions.

That is both wrong and impossible. You are human so you have emotions. Emotions can be a powerful motivator to your trading.

When you feel angry or scared in trading, take that emotion and translate it into something more productive. For example, if you’re feeling angry because you just got run over by the market, view that anger as a reason to be more focused and disciplined in your entry and exit levels on the next trade.

Two quotes from :REMINISCENCES OF A STOCK OPERATOR

  
  Education
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Doing The Right Thing

The professional concerns himself with doing the right thing rather than with making money, knowing that the profit takes care of itself if the other things are attended to. A trader gets to play the game as the professional billiard player does—that is, he looks far ahead instead of considering the particular shot before him. It gets to be an instinct to play for position.

Price Tendency

You watch the market—that is, the course of prices as recorded by the tape—with one object: to determine the direction—that is, the price tendency. Prices, we know, will move either up or down according to the resistance they encounter. For purposes of easy explanation we will say that prices, like everything else, move along the line of least resistance. They will do whatever comes easiest, therefore they will go up if there is less resistance to an advance than to a decline; and vice versa.

Does Failure Motivate you ?

  
  Education
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MOTIVATEI’ve been reading a wondeful book by Jerry Stocking titled Laighing with God.In that book the following dilemma is broght up ,and I’m going to rewrite the conversation a little to make it pertinent to trading/investing.

God :Do you want to win without losing ?

Trader :Of course.

God :If you win ,you must lose as well.But you weren’t honest with me.Your saud that you’d like to just win.If that were the case ,you’d win much  more often.

The possibility of failure motivates you much more than the possibility of success.your whole society thrices on failure  or at least the fear of lossing.If there were not the possibility of losing you could not take any credit for success.Making money in the markets would seen meaningless for you. (more…)

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