Despair = Losing Money – Trading Better Do not despair look at your losses as part of doing business and as paying tuition fees to the markets. Disappointment = Expectations – Reality Enter trading with realistic expectations. You can realistically expect 20%-35% annual returns on capital with great trading after you have experience and have done the necessary homework. More than that is possible but you will have to be one of the very best to achieve greater returns than this. Regret = Disappointment in a loss+ Caused by lack of Discipline If you followed your trading plan and lose money because the market did not move in your direction so be it, but if you went off your plan and traded based on your feelings and opinions then you should feel regret and stop being undisciplined. Enjoying your Trading = Winning Trades – Fear of Ruin Trading is much more enjoyable when you are risking 1% of your capital in the hopes of making 3% on your capital with a zero chance of ruin. It is not enjoyable when you are putting a huge percentage of your capital on the line in each trade and are only a few bad trades away from your account going to zero. Trading Wisdom = Understanding what makes money + Years of successful trading To get good at trading you have to trade real money. Wisdom comes from putting real money on the line for years and proving to yourself that you can come out a winner in the long term. Faith in your system = Belief through back testing + Experience of winning with it for years Whether any individual trade is a winner or loser should not influence your faith in your system and trading method. You should trade in a way that each trade is just one trade out of the next 100. Much of emotional trading can be overcome when you do not have doubts about your method. When you hold an almost religious fervor over believing in your method, system, risk management, and your own discipline you will overcome many of the emotional problems that arise in the heat of action during a live market. |
Archives of “money trading” tag
rssTrading Wise Words
Turtle Trading Principle
Trade with an edge, manage risk, be consistent, and keep it simple.
The entire Turtle training, and indeed the basis of all successful trading, can be summed up in these four core principles.
Curtis Faith, Way Of Turtle
Why Chart Patterns Repeat Themselves
All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope.
That is why the numerical formations and patterns recur on a constant basis.
Jesse Livermore, How To Trade In Stocks
Stick To Your Trading Rules
Successful trading is about finding the rules that work and then sticking to those rules.
William J. O’neil
Perfect Speculator
Perfect speculator must know when to get in; (more…)
The Same Winning Principles
In life, as in trading, the right mindset is crucial for success. You must be confident in your decisions because they are based on cause and effect, not on emotions or opinion. Negative people who are unsure of themselves are not successful in any field. You need faith in yourself and your methods to be able to persevere and not give up before reaching success.
• You can risk too much and lose it all in your business, life, marriage, friendships or family. You have to measure the potential cost of every action. One affair can cost you your marriage, just like one big trade with too much risk can cost you all your capital.
• In business there are certain methods which bring in customers and turn a profit, and others which cause a business to turn away customers and lose money. Trading is similar: methods which turn a consistent and long-term profit are essential for success.
• Having unrealistic expectations in a marriage, job, or business will lead to unhappiness and failure just like it will in trading. You have to set realistic expectations so
you do not get discouraged easily and quit in any of these areas. You have to be satisfied that the results are worth your effort over the long term. You need to understand what to expect before you begin a marriage, a job, a business, or trading. (more…)
Trading Psychology
Are you trading because you want to trade? Consider trading a business not a game.
Are you not trading? This is the opposite of trading too often. You may be so scared
of taking a loss that you avoid trading altogether.
If you get stopped out of several stocks, walk away. Paper trade until the profits return.
Follow the system. Would you be making more money if you followed your trading
signals? Understand why you’re ignoring the signals you receive.
Don’t overtrade. Sometimes the best place for cash is in the bank. You don’t HAVE
to trade.
Learn from mistakes. Review your trades periodically. It’ll uncover bad habits.
Focus on the positive. The loss your suffered today pales to the killing you made last
week.
Ignore profits. If you find yourself getting nervous about a winning trade or making
too much money, then concentrate not on the bottom line but on improving your
trading skills. Get used to making too much money.
Obey your trading signals. Otherwise, what are you trading for? Plan your trade and
trade your plan.
Don’t trade when you’re upset. This also goes for being too excited.
Abandoning a winning system. Don’t become bored with your winning system and
search for new, more exciting ways to lose money.
Cut your losses short, no questions asked
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
Reasons why traders lose money
Over trading- Lack of knowledge & lack of experience
- Trading without a plan
- Not having enough capital
- Over confidence
- Lack of confidence
- Emotional trading
- Afraid to lose money
- Trading with complex system
- Relying on others
- Not willing to take it as a business
- No giving enough time to be a trader
- Trying to be successful overnight
- Running Losses
Every mistake a trader can make
Symptoms:
Trading with “scared” money
- Trading from a state of desperation and fear
- Ruled by emotions and unable to take a loss
- Changing her trading plan often
- Trying to be perfect
- Looking for medication to deal with emotional issues over trading
- Adopting a trading technique (scalping one futures contract) that is beyond her level of trading competence
- Attached to the outcome of each trade
- Not committed to the process of learning to trade—using trading as a temporary “stop-gap” source of income until something else becomes available.
Acting out personal dramas in the financial markets
Trading Principles
• In life, as in trading, the right mindset is crucial for success. You must be confident in your decisions because they are based on cause and effect, not on emotions or opinion. Negative people who are unsure of themselves are not successful in any field. You need faith in yourself and your methods to be able to persevere and not give up before reaching success.
• You can risk too much and lose it all in your business, life, marriage, friendships or family. You have to measure the potential cost of every action. One affair can cost you your marriage, just like one big trade with too much risk can cost you all your capital.
• In business there are certain methods which bring in customers and turn a profit, and others which cause a business to turn away customers and lose money. Trading is similar: methods which turn a consistent and long-term profit are essential for success.
• Having unrealistic expectations in a marriage, job, or business will lead to unhappiness and failure just like it will in trading. You have to set realistic expectations so
you do not get discouraged easily and quit in any of these areas. You have to be satisfied that the results are worth your effort over the long term. You need to understand what to expect before you begin a marriage, a job, a business, or trading.
• Those who succeed in all areas of life are the ones who can manage stress the best. The best way to manage stress is to increase what you can handle step by step so that you grow into new circumstances. Another way to manage stress is to avoid actions which get you into situations you are uncomfortable with.
Negative Trading Behaviors
*Over Trading in Size *Jumping the Gun *Hesitating *Skipping Trades *Being in A Hurry * Trading without Proper Preparation *Getting Stuck in A Losing Trade *Whipsawing *Breaking Your Trading Rules *Shooting From the Hip * Over Interpreting *Discounting *Trading A Scenario without Reference to Price *Trading Heedlessly *Trading Wildly *Abandoning Your Trading Plan *Not having A Trading Plan *Switching Strategies Frequently *Not having A Proven Strategy *Not Pulling the Trigger *Not Believing the Evidence the Market Provides *Blindly Believing A story you tell yourself *Blindly Believing A story somebody else tells you *Becoming Impulsive.*Not Verifying A System Or Method Before you trade it.*Over Researching *Using Trading as a Spectator Sport *Jumping in before you think *Trading too Big *Grabbing Profits too soon.*Getting Careless *Being too Careful *Not adding to A Winning Trade.*Trading Heavier when losing *Forcing trades *Getting Trigger Happy *Gulping Profits too soon *Adding to A losing Trade.*Overtrading in terms of Frequency *Sticking with A Losing system *Sticking with A Broker that gives you bad Fills.*Not Making Trading A Priority*Worrying what others will think.*Trading with borrowed Money.*Trading with Money you need to live on*Holding Unrealistic Expectations.*Engaging in Negative and Destructive Self talk*Becoming Despondent about your trading results.*Wanting certainty before you trade.*Disregarding Probabilities*Fooling Yourself about your Trading.*Not keeping Proper Records*Not Acknowledging Mistakes.*Not Learning from Mistakes.*Repeating Mistakes*Engaging in Self Pity* Blaming Others *Getting Envious of other traders *Giving Up periodically *Resisting loss* Feeling shame for loss *Lying and Covering up results *Becoming pessimistic about the future of your trading * Being Unrealistic about your present trading &Tying self worth to trading * Bragging about Trading * Being Unduly Secretive about trading * Using trading to inflate your ego *Letting trading interfere with A full and Balanced life *Letting life interfere with A Full and Balanced trading *Using trading to avoid living *Doing anything Unethical regarding your trading *Doing what Doesn’t work *Not continuing to do what does work *Getting Reckless & Getting Overcautious * Letting others put your down Re your trading * Waiting to Respect yourself untill you succeed with trading*Being Unorganized in your efforts * Trading for the sake of trading *Letting Distractions take your attention away from trading * Not Specializing *Not executing with precision *Forgetting to cancel stops after a trade is off*Fighting Yourself *Fighting the Market *Fighting Your Methods *Making careless errors & Personifying the Market *Projecting your own feelings on the market.
-Other
Go over each of the Behaviors you have checked and scale them from 1 to 10 as to severity.Let 10 represent the most harmful to your trading.
7 Bad Habits of Traders
Trading with no stop losses. You can’t control your profits but you can control and limit your losses with a planned exit. Not having an exit plan can be very expensive when a trend takes off against you and you start hoping instead of just cutting your losses and moving on.
- Your opinion can be very expensive. Trading your opinion against all other market participants can be very expensive. The market goes where it wants and when you disagree with where it is going it will cost you.
- “Egos are expensive things.” – Ray C. Freeman. Inflated egos cause a trader’s #1 priority to be proving they are right and refusing to admit when they are wrong. It is very expensive for ego gratification to be above making money.
- Trading off predictions can cost a lot of money when they are wrong. There is more to be made by reacting to what the market is doing instead of predicting what you think it will do later.
- Stubbornness causes small losses to become big losses. It causes a trader to make the same mistake over and over becasue they do not assimilate feedback they keep doing the same thing over and over and getting the same results.
- Not having an exit strategy for a winning trade can be very expensive, it is possible to ride a big winning trade into being a big loser if you do not have a set way to take profits. Trailing stops and targets can put the profits in the bank.
Trading too big of position sizes for your account size can be very costly because no manner how good your winning trades are you are set up to give back the profits with a few big losing trades.
