Archives of “making money” tag

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What is Luck & What is Skill in Trading?

  
  Education
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Luck is picking the right stock and riding it up for great profits, skill is knowing when to get out and lock in profits.

Luck is returning 20% in one month, skill is returning over 20% a year for 5 straight years.

Luck is making money in a bull market, skill is making money in a bear market.

Luck is making money when the market matches your perma bull or perma bear style, skill is making money in both bull and bear markets.

Luck is picking one monster stock, skill is picking three monster stocks back to back.

Luck is having one big bet pay off for huge profits, skill is surviving 200 straight trades and not blowing up your account.

Luck is surviving the market while not knowing what you are doing, skill is acquired after you have done your homework.

So, do you have skills as a trader or have you just been lucky? So far………

The market is the calculator

  
  Education
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If you are attempting to reach 10 via the calculator, there are many and various ways of getting there:  5+5, 2+8, 15-5, 25 –15, or even  2 + 2 –1 –1 –2 –2 +3 +3 +3 + 3.  When it comes to making money in the market our calculator may want to make it to 10 much quicker than the market does and we may want to add 5 + 5 to get there but be prepared for the market to take its own sweet time adding things up.  If all that matters is getting to 10, then make sure the road you take is paved with minuses along with pluses along the way or all your money will be going to the 5508 (punch this number into your calculator and turn it upside down to see what it spells), which will make the employee a very unhappy and broke individual.

Stock trading is easy as long as we understand how to do the math.

Avoid EGO in Trading

  
  Education
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“Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.”
“At other times in the past, investors lost a good profit by holding on too long, trying to get a long-term capital gain. Some investors, even erroneously, convince themselves they can’t sell
because of taxes—strong ego, weak judgment.”
“When did you turn from a loser to a winner?When I was able to separate my ego needs from making money. When I was able to accept being wrong.Before, admitting I was wrong was more upsetting than losing the money.”
“Most traders who fail have large egos and can’t admit that they are wrong.”
“Clearly, flexibility and suppression of ego are key elements of Gelber’s success.”
“Actually, the best traders have no ego. To be a great trader, you have to have a big enough ego only in the sense that you have confidence in yourself.”
Ego can also stop you from being profitable as a trader. Maybe you only like to short because you think this economny is going to H____ and the market rallies for a month and the whole time you try shorting it when you should be buying the pullbacks. In this scenario, the stongly held belief system is affecting the traders ability to see what is really going on and costs either being stopped out, or only making a small profit and missing the big moves etc.
So, the more we can become egoless, flexible in our mind and not have a preconceived direction the market is going in, the better we will be as a trader.  (more…)

Fixed Mind Set Traders

  
  Education
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The following is for those traders who, with a fixed mind-set, think…

…success is something over there

…trading is about being right, not about making money

…trading is too challenging

…the stock market is fixed with too many obstacles

…trading is about finding the effortless holy grail

…losses are to be avoided at all costs

…others’ success is threatening

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

What is the Purpose of Trading?

  
  Education
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What is the purpose of trading?purpose-driven-life

It seems clear, doesn’t it? The purpose of trading is to make money. The trade is planned, entered, and exited with the goal of increasing the size of one’s trading account. What other purpose would there be?

The dictionary says this about purpose:

“something set up as an object or end to be attained : intention b: resolution, determination”

What about:

The purpose of trading is to not lose money.
The purpose of trading is to practice discipline.
The purpose of trading is to use my talents.
The purpose of trading is to grow.

Or how about:

The purpose of trading is to express my true nature. I was meant to be a trader.

Maybe the purpose of trading is simply to trade. Because that is what you have been called to do, or what you are meant to do, or it’s the highest expression of your nature as a producer rather than a consumer. When you trade successfully, you are disciplined, you are growing, you are using and developing your talents, you are making money, and you are creating wealth from scratch. But most of all, you are trading because it’s the right thing to do for you.

Be responsible

  
  Education
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Be responsible for your own trading destiny. Analyze your trading behavior. Understand your own motivations. Traders come into Future  trading with a view to making money. After awhile they find the trading process to be fascinating, entertaining and intellectually challenging. Pretty soon the motivation to make money becomes subordinated to the desire to have fun and meet the challenge. The more you trade to have fun and massage your ego, the more likely you are to lose. The kinds of trading behaviors that are the most entertaining are also the least effective. The more you can emphasize making money over having a good time, the more likely it is you will be successful.

Be wary of depending on others for your success. Most of the people you are likely to trust are probably not effective traders. For instance: brokers, gurus, advisors, system vendors, friends. There are exceptions, but not many. Depend on others only for clerical help or to support your own decision-making process.

Don’t blame others for your failures. This is an easy trap to fall into. No matter what happens, you put yourself into the situation. Therefore, you are responsible for the ultimate result. Until you accept responsibility for everything, you will not be able to change your incorrect behaviors.

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