If you never trade, can you be a successful speculator?
If you dollar cost average, and are disciplined, are you a successful speculator?
If you compound at 50% per year for 10 years, and then lose everything in an afternoon, are you a successful speculator?
If you lose everything in an afternoon, and then learn from your mistake, and then compound at 50% for the next 10 years, are you a successful speculator?
If you compound at 6% per year for 10 years, and never have a meaningful drawdown, are you a successful speculator?
If the risk free rate is 6%, and you are making 12%, are you a more successful speculator then if the risk-free rate is 0% and you are making 6%?
If you think you are a successful speculator, can you really be a successful speculator?
If you think you are not a successful speculator, can you be a successful speculator?
Who are the most successful speculators of the past 100 years? Who are the least successful speculators of the past 100 years?
Archives of “mistake” tag
rss4 More Rules to Trade
1. Average Winners Not Losers. It is not “don’t frown, average down”; it is applying the discipline to cut losers short and adding to winners that separates the successful from the unsuccessful. If you have a winning stock then add to it. If you have a losing stock then get rid of it. 2. Never Let a Winner Turn Into A Loser. Greed is the cause of this mistake. Let the market tell you when to exit a trade, not whether you have a profit or not. “If your trade is acting well, as defined by key indicators, and the market activity is supporting your position, stay in. If not, its go time!” Do not let a good profit vanish into thin air because you want more than the market is willing to give. 3. Never Mix Disciplines. If you day trade then day trade and do not let a day trade turn into a swing trade. If you swing trade do not let your swing trade turn into an investment. Follow the rules based on the discipline of your time frame. 4. Never Try To Trade Back A loser. In other words, each trade is a new one and should not be used to win back money lost in the last trade. Always trade in the present not in the past where too many emotional and psychology factors can affect the current trade. Revenge does not pay in or out of the market. |
10 Rules for Rookie Day Traders
Here is our philosophy around trading rules:
Rule should be designed to promote growth, not create limitations.
Rules should make YOU better.
Rules need to be second nature.
1. The three E’s: enter, exit, escape
Disagree, I can’t explain for proprietary reasons.
2. Avoid trading during the first 15 minutes of the market open
I agree that the first 15 minutes is risky but the most important thing to a new trader is lasting as long as possible. You are going to be better the more time that goes by, but you learn faster by doing. It is a tough balance.
3. Use limit orders, not market orders
Limits keep you out of the market, which is important. But they can also keep you in a market, which is of importance too.
4. Rookie traders should avoid using margin
Agree. Your winning positions should be larger than losing position, but a new trader doesn’t usually know which is which.
5. Have a selling plan
Agree. (more…)
Fear & Greed
Most of us make the same mistake with our money over and over again: We buy high out of greed and sell low out of fear, despite knowing on an intellectual level that it is a very bad idea.
Think about this pattern for a minute. At the top of the market we can’t buy fast enough. About three years later at the bottom, we can’t sell fast enough. And we repeat that over and over until we’re broke. No wonder most people are unsatisfied with their investing experience.
No one is sure how this will turn out. But with interest rates again near record lows (meaning bond prices are near record highs), you could end up losing money in that bond fund you bought for the purpose of making sure you don’t lose money.
It makes far more sense to ignore what the crowd is doing and base your investment decisions on what you need to reach your goals, then stick with the plan despite the fear or greed you may feel. To do otherwise would be following a pattern that has proven to be extraordinarily painful.
Five Steps To Consistent Profits
- Work on yourself and your personal issues so that they don’t get in the way of your trading. This step must be accomplished first; otherwise, it would interfere with each of the other steps.
- Develop a business plan as a working document to guide your trading. This business plan is not to raise money, which is the purpose of many business plans. Instead, it’s designed to be a continual work-in-progress to guide you throughout your trading career. The business plan actually helps you with all five of the steps. The plan also includes an overview of the big picture influencing the markets you will be trading and a method for keeping on top of those factors so that you will know when you are wrong.
- Develop several strategies that fit your view of the big picture and understand how each of these strategies will perform under various market types. The ultimate goal of this step is to develop something that will work well under every possible market condition. It’s actually not that hard to develop a good strategy for any particular market condition (including quiet, sideways). What’s difficult is to develop one strategy that works well under all market conditions—which is what most people attempt to do. (more…)
Why do you think most traders fail?
- Poor selection criteria; usually based on personal opinion, theory or tips and bad advice
They don’t stick to and commit to an approach; style drift
Don’t cut losses (#1 mistake made by virtually all investors)
Don’t know the truth about their trading – they fail to conduct in-depth post analysis
Treat trading as a hobby and not a business
- Want too much too fast; learning a skill takes time
There’s a lot of important meat in those few lines of text. We all recognize that it’s not easy to cut losses, but I firmly believe that this results in more grief for traders than anything else. What causes a trader to suffer a big hit? I believe that it’s the unwilligness to accept that a trade is not working, and that it’s not likely to get any better if held longer. Under those conditions, losses mount. The only way to prevent that big loss is to cut it off at its knees – and the time to do that occurs when it’s a much smaller loss.The difficulty with that is sacrificing the possibility that the trade would turn profitable. My advice: Get over it. Many trades will be unprofitable. That’s a fact of life for a trader.
I understand that on a rare occasion a gap opening may do irreparable damage, and not provide an opportunity to take the small loss. However, that’s also a preventable occurrence. If the damage is too great, then the position was too large. It really is as simple as that.
How many of us look at trades after the position is closed? How many dissect the entire trade in an attempt to find out what was done correctly and what mistakes were made? Very few.
A mistake is not a trade that loses money. A mistake is making a decision that was clearly incorrect at the time, but the trader was unable to see that. Another mistake is avoiding a trading plan and not doing postmortems on your trades. It all takes so much time. However, if you take trading seriously, and do not consider it to be a hobby, there’s work to be done.
Mistakes are part of the game. Making the same mistake repeatedly is not. At least it’s not part of any successful trader’s game.
10 Trading one Liners
Correct knowledge and the ability to change behavior are the most important parts of successful trading. Getting Back Up
Sometimes in trading you have to pick yourself up and dust yourself off. It is the simple truth and anyone who has been involved in the game for longer than a cup of coffee will tell you the same. There will be times when you are caught with a blow up, caught in a squeeze or simply caught leaning in the wrong direction but over the years what I have learned is it is always about getting back into the ring for another round.
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It’s important to have a routine for handling those times when not only your financial capital gets bitten but your emotional capital sinks as well.
1) Reposition: Whether you are caught in a downturn or short squeeze, removing the position is often the best way to remain objective. So often when people start to see a position run against them they freeze up and start to rely on hope rather than remaining in control of the trade. When I see stocks breaking down or acting poorly, they are sold immediately and I am able to start fresh.
2) Check the Charts and your Bias: I have written many times before that price action is never wrong. If you are caught on the wrong side of price action it is a must to re-evaluate the charts you are viewing and check any bias you may have. It is imperative to embrace the prevailing direction and avoid seeing what is not there. Having raised cash and avoiding any further significant draw, take a fresh look at the action and once again analyze your position accordingly.
3) Embrace the New Day: Trading is unique in that each and every day presents a new opportunity. This must be embraced as it is one of the features that makes trading so great. Rather than dwelling on the past, embrace the future. Each and every day presents new opportunities but not unless you are looking for them.
4) Move Slow and Small: Most people make the mistake in believing that restoring financial capital will improve emotional capital when I would argue it is actually the opposite. One can only trade at peak performance when his emotional tank is filled and confidence is high. Regardless of how long you have been trading there will be times when this tank takes a dip and before moving on to make any new financial progress, it is imperative to restore the emotional side first. The best way to do this is to move very slow and small. Rather than taking full positions, take quarters or even tenths. Paper trade if you need to and analyze results. As time goes on your emotional capital will be restored and you will soon have the confidence to re-enter the game at full speed.
If you trade, one thing is for sure, you will have good times and you will have bad times. The best way to handle the bad times is to know they will come and have a plan in place to follow so that you may bounce back quickly and put them in the past.
Sometimes in trading you have to pick yourself up and dust yourself off. It is the simple truth and anyone who has been involved in the game for longer than a cup of coffee will tell you the same. There will be times when you are caught with a blow up, caught in a squeeze or simply caught leaning in the wrong direction but over the years what I have learned is it is always about getting back into the ring for another round.No Expectations-No Opinions
The Biggest source of agony and frustration in trading comes from our expectations of what a market should or should not do !Agony becomes intense when we fail to act to correct our orginal assumption of our market expectations.
There is No Mistake in being wron-The
It Would be A Mistake To Think That The Bailout Is Actually A Bailout Of Greece
The ECB has talked more hawkish than the Federal Reserve but basically they are all money printers. Some are better at it, and faster and have more efficient machines the others are slower but basically central banks, they run a print and print.
And it would be a mistake to think that the bailout is actually a bailout of Greece. Greece is a write-off. You can`t have the kind of debt Greece has with Olive Oil income. They have no industries to speak of. They have shipping but the shipping industy does not pay taxes in Greece.
So basically the bailout is actually a bailout of the ECB itself because they already have a lot of paper of Spain, portugal and Greece in their portfolio and a bailout of the banks in Europe. They lent money to Greece, Spain and Portugal, so they are all in the same boat.