Gut feel is very important. Being a successful trader also takes courage; the courage to try, the courage to fail, the courage to succeed, and the courage to keep If trading is your life, it is a tortuous kind of excitement. But if you are keeping your life in balance, then it is fun. All the successful traders have a balanced life; they have fun outside of trading. The first rule of trading is that don’t get caught in a situation in which you can lose a great deal of money for reasons you don’t understand. Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are will to lose per contract. A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not. |
Archives of “mistake” tag
rssTrading with No Regrets
Trading is really not as much of a numbers game as it is a mind game. Winning or losing in the long term will come down to whether you quit or keep going on your trading journey. Trading is not for everyone, there is no easy money in the markets. You will fight for your dollars, you will make money by doing the uncomfortable you will lose money when you think you are in a trade that just can’t lose. The emotional and mental pain will be unbearable if you do not believe in yourself and your method. If you are trading with no plan, no rules, and no system or method you will tend to be very hard on yourself for every losing trade. It was your decision that made you lose money, you will beat yourself up, and feel stupid. You will have 100% accountability for your mistake.This will not work.
What you must do is transition the accountability from yourself to your system or method. You must trade a proven methodology that will win based on the market action not your personal actions. You can not control odd out of left field events. You can not help it if you trade a trend or a pattern and suddenly it loses. All you can do is take trades with great probabilities that match your beliefs about the market and if they are losers then you can’t blame yourself you can only cut your losses and look for the next trade that meets your parameters.
When you can shrug off a loss with no emotional or mental pain and move on to the next one you are at the next level. All you can control is your entry parameters, risk management, position size, exit, and mind set, the market determines whether you win or lose, not you. You must have self confidence and faith in a proven method, take your trades let the market separate the winners from the losers.
3 TRADING COMMANDMENTS
You Learn More From Your Enemies Than You Do From Your Friends. Make sure you take the criticism’s of others and use them to your advantage by recognizing that the more others criticize the more you value your own beliefs, trading or otherwise.
Be Careful Who You Get Into Bed With. Although not a trading rule per se, keeping good, solid company outside the charts, can help you be the best trader inside the charts. “Trust and integrity between two people are the most important variables in life and in business”
Never Operate From a Position of Fear. “If you are fearful in the markets, either as a result of taking a recent loss or some other mistake, or even as a result of being nervous about the level of risk you are taking, then you are putting yourself in the position of making and unclear and hence incorrect decision”
Trading is like SEX
- -Some like it long, some like it short.
- -You can study the market as much as you like, but it all comes down to luck.
- -Those who talk about it the most, have the least experience.
- -One simple mistake could lead to 18 unprofitable years.
- Some prefer to sit back and watch it grow.
- -Low confidence can keep you out of the market.
- -Everyone tends to focus on performance.
- -Some do it alone, others do it with a group, and some hire professionals.
- -and the number one reason….Some positions are better than others and the best position is always up for debate!
-And remember, past performance is not necessarily indicative of future results.
4 Rules from Great Traders
Overcome Fear :Great traders know that fear can choke our decision process and cause us to avoid taking risks.Fear also can paralyze you when you need to act quickly and decisively to save yourself from danger-the deer-in -the-headlights syndrome.All great traders have mastered their fears and are able to act decisively when needed.
Remain Flexible :As a trader ,you never know which stock or which market may make a move.This is the essence of uncertainty.Your don’t know what is going to happen.When you don’t know what is going to happen ,the best strategy is to be ready for anything.
Prepare to be wrong :If you don’t know what the future will bring and you choose a trade that assumes a particular outcome,you are possibly going to be wrong.Depending on the type of trade,in many cases it can even be more likely that you will lose money then that you will win money.What matters in the end is total money won and lost ,not whether you are right more ofthen then wrong.Great Traders are comfortable making decisions when they know they could be wrong .
Focus on decisions ,not out comes :One of the reasons that great raders can so easily reverse course is that they have a more sophisticated view of the meaning of error for decisions made under uncertainty.They understand that the face that things did not turn out the way they had hoped does not necessarily mean that taking the trade was a mistake.They know that many times good ideas dont’t work out.The very presence of uncertanity ensures that you will be wrong some of the time.All great traders put trades on for a particular reason ,and they take them off for a particular reason too.Great traders focus on the reasons for the trades instead of the outcomes for few given trades.
No Patience on Entry
Anticipating a signal that never comes is common for traders monitoring the market closely and eager to get some money working. For example, a good buying opportunity arises when a stock breaks from an ascending triangle. Jumping in ahead of the breakout is not an ideal situation because the probability of success buying an ascending triangle is not as good as buying a breakout from one. What causes this mistake? I think a fear of missing out on the maximum amount of profit or the fear of too much risk in buying a stock are the two most common mistakes. Essentially, the two guiding forces of the stock market are at work here; fear and greed. By buying early, we can realize a greater profit when the stock does breakout since we will have a lower average cost. Or, by buying early we can reduce risk since a breakout followed by a pull back through our stop will result in a smaller loss as we have a lower average cost. What tends to happen, however, is that the stock does not break out when expected and instead pulls back. This either leads to an unnecessary loss or an opportunity cost of the capital being tied up while other opportunities arise.
The Solution
The simple and obvious solution is to wait for the entry signal, but there are also some things you can do to help yourself stay disciplined. Rather than watch potentially good stocks tick by tick, use an alarm feature to alert you to when they actually make the break. Watching stocks constantly is somewhat hypnotic, and I think the charts can talk you in to making a trade. However, letting the computer watch the stock may help you avoid the stock’s evil trance. Another good solution is to focus on different thoughts when considering a stock. Don’t think about potential profits, don’t think about minimizing losses. Instead, focus in on the desire to execute high probability trades. It takes time to reprogram yourself, so persevere.
Bernard Baruch: 10 Rules of Investing
“Being so skeptical about the usefulness of advice, I have been reluctant to lay down any ‘rules’ or guidelines on how to invest or speculate wisely. Still, there are a number of things I have learned from my own experience which might be worth listing for those who are able to muster the necessary self-discipline:
1. Don’t speculate unless you can make it a full-time job.
2. Beware of barbers, beauticians, waiters — of anyone — bringing gifts of “inside” information or “tips.”
3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.
4. Don’t try to buy at the bottom and sell at the top. This can’t be done — except by liars.
5. Learn how to take your losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.
6. Don’t buy too many different securities. Better have only a few investments which can be watched.
7. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
8. Study your tax position to know when you can sell to greatest advantage.
9. Always keep a good part of your capital in a cash reserve. Never invest all your funds.
10. Don’t try to be a jack of all investments. Stick to the field you know best.
Learning from Tiger Woods
I am sure most of the questions on the eve of the third round of the British Open revolve around Tiger Woods absence. “What’s wrong with Tiger?” “Is he losing his mental edge?” “Is he hurt?” “Has something gone wrong in his personal life?” “Why so many mistakes?”
Here is my question: Why can we not celebrate the fact that Tiger Woods is human? He is human isn’t he? I know he is as mortal as we all are. That is what we all have in common. Why do we insist on him winning every tournament he enters? He won the last tournament he entered.
I think someone who always wins dies a slow death. You know, the Alexander the Great syndrome. “He [Alexander] wept with sorrow,” Plutarch said, “Because there were no more worlds to conquer.” (more…)
Lessons Learned
“So far in 2009, what are the the most important thing I had learned about investing, trading, and/or the markets?”
Success takes longer than expected
- That you must learn to trade and trust yourself and not to become so dependent on the opinions of others, which ultimately keeps you from becoming the best you can be
- Keep it simple
- The very best profit opportunities occur in the midst of extreme emotional sentiment
- Always think opportunistic verses too bullish or bearish
- Persistence and dedication to a daily routine is key
- Developing an edge is the first step for trading successfully. Without that, disciplined trading will only make sure you gradually losing money
- The market is one unforgiving bitch!
- It is challenging to find non-correlated markets
- You have to respect the market even if you think it is under some kind of manipulation
- Keep your eyes open and powder dry
- If you fall in love with a stock keep 100 shares and let the rest go
- I’ve learned to be patient in waiting for my patterns to appear
- The value of ETFs
- The importance of finding special situations that will be profitable no matter what the market does
- Stay away from light volume when the only thing trading is the black boxes
- The importance of focusing only on one technical setup in order to improve one’s skill set
- I now think that buy and hold is a serious mistake
- Think big and think long term
- Don’t try to predict the markets
- Don’t be afraid in bear markets, just another opportunity
- The odds are stacked against the retail investor
- There’s no such thing as a sure thing
- The harder I work at it the more likely I am to succeed
- Conserving one’s capital is vital
- I know the rules – I just need to notch-up my discipline
- Smaller entry positions can be helpful
- Opportunities are everywhere
- The market is primarily psychologically driven
- Trade with the trend instead of trying to pick tops and bottoms
- Know where and when to get out before you get in
- As Johny Cash put it “You got to walk that lonesome valley, you got walk it by yourself. Nobody else can walk it for you. You got to walk it by yourself.”
- The difficulty of avoiding over-optimization/curve fitting
- Overtrading can be, and often is, a recipe for disaster
- To breathe before executing a trade
- Trading is not a profession for pessimists
- Never feel confident even when winning. Humility is a good thing
- You need to be quick and brutal with the trading decisions
- It is okay to sit out a potential move – risk management over reward chasing
- Don’t bet the farm in either direction
- There is no consistent logic to trading the market
- Some trades need to be taken when they appear, not just when you are ready
- There’s no rule that quality stocks must go up
- Don’t chase any overbought stocks
- When a sector (like financials) look so hopeless as it did in March there is potential to make a lot of money if things turn around even just a little
- Hope is a four-letter word and has no place in a trading strategy
- Patience. It is ok to sit out once in awhile
- Wait until you have an proven strategy supported by data before trading for keeps
Anything can happen. Trading is all about probabilities
Technically Yours-ANIRUDH SETHI ,BARODA ,INDIA
4 Rules for Traders
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.