– Losses are a simple cost of doing business
– Since you always limit your lose to an amount of your account can withstand, there is nothing to fear.
– You have the courage to do whatever it takes to succeed at trading
– Each Trade is but one of many
– You keep your focus in the present because this is where the action is
– The potential profits are worth the risk
– Trading is about money, it’s not about your survival.
– Trading is only one way in which you can make money.
– You learn and grow stronger with each trading experience
– The future of your trading is bright.
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rssTrading Your Personality
It’s been said too many times to count – that you must trade according to your personality. In the movies they might call it “being true to yourself” or something cheesy, but it’s a necessity in this job.
Recently I was asked which chart patterns I prefer to trade, continuation chart patterns or reversal chart patterns. My answer was that while I will actually trade either, I suppose the continuation and breakout type of patterns are the ones I trade more often than reversals or buying on support levels.
I don’t think one setup is superior to the other, they both have their pros and cons, and you have to go with what fits your style best.
Buying on support is an anticipatory play, which may take a few extra days to get moving. It can give you a lower cost basis than another trading strategy, but will require greater patience on your part while you wait for the stock to find traction.
Buying a stock which is breaking out puts you (by definition) in a stock that’s already on the move. This is a confirmation play. You get instant feedback on how your trade is developing and how much momentum the stock has.
The setups you select for your trades need to incorporate your personality tendencies on managing those trades once you are in them. For me, I tend to be a bit impatient and I want to know as soon as possible whether or not I’m right or wrong on a trade. Other traders don’t live in the left lane, and they’re willing to give a stock some time to get moving one way or another. They place their protective stop and turn their attention to something else in the meantime while waiting for their trade to make a move. Personally, I prefer to have my money at risk for the shortest timeframe possible. I really prefer the times when the market conditions are producing breakout plays and continuation patterns like the bull flag or ascending triangle patterns.
So, when you’re doing your homework and looking for quality setups to trade, be sure to consider the ones which fit your personality and your style of trading. Those will be the trades which you ultimately will manage the best.
Ten Destructive Trading Thoughts
- That resistance is way too close, I really shouldn’t have taken that signal.
- I should definitely trade that breakout. My method doesn’t trade breakouts,but that’s areally good-looking trade.
- I’m long, this is a downtrend. What the heck was I thinking?
- This going to be a loser, for sure.
- Price has ripped so far away from me – please don’t turn into a signal.
- This is clearly in a congestion range. I’m going to ignore that signal and wait for a breakout.
- Buying spikes – this short is doomed. See ya, money.
- Yippeee! It’s not turning into a signal!
- Ooh, nice profit – I should take that while it’s still there.
- Take the profit. TAKE THE PROFIT. TAKE THE DAMN PROFIT!!!!!
Trader's Mindset
How does someone know that they reached the trader’s mindset?
Here are a Few Characteristics :
- No anger whatsoever.
- Confidence and being in control of the self. (more…)
Trading Commandments From A Samurai
1. “Accept everything just the way it is.”
= accept the market reality in front of you.
2. “Do not seek pleasure for its own sake.”
= don’t trade for pleasure
3. “Do not, under any circumstances, depend on a partial feeling.”
= don’t jump or out of trade on shallow half-baked impulsive feelings.
4. “Think lightly of yourself and deeply of the world.”
= don’t take your trading skills too seriously, take the ability of market to surprise seriously.
5. “Be detached from desire your whole life long.”
= make money, but don’t let money make you.
6. “Do not regret what you have done.”
= smile at your mistake, laugh off your profit.
7. “Never be jealous.”
= what you’ve got is good and enough and incomparable
8. “Never let yourself be saddened by a separation.”
= a loss is never final. it either stays back as lesson or returns as profit.
9. “Resentment and complaint are appropriate neither for oneself or others.”
= accept the reality, keep the power with yourself by not complaining.
10. “In all things have no preferences.”
= don’t measure your profit or loss, just measure them by the lesson or experience.
11. “Do not act following customary beliefs.”
= dare to think!
12. “Do not collect weapons or practice with weapons beyond what is useful.”
= a handful of tools are enough if you are willing to submit.
13. “Do not fear death.”
= do not fear unforeseen loss.
14. “Do not seek to possess either goods or fiefs for your old age.”
= don’t trade under pressure to accumulate profit. if you remain alive, markets will always be there. just keep learning the game.
15. “Respect Buddha and the gods without counting on their help.”
= respect luck, acknowledge god’s blessing, but don’t drag them in the market.
The Common Elements Of Success
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From time to time I have been asked to offer my perspectives on things I have found common in successful traders. I have always struggled with my reply to that question because there are only a few traders of which I have gained enough understanding of what they do every day to achieve their results.
However, in Van Tharp’s latest book “Super Trader,” he provides 10 common characteristics frequently found among the best of the best among the hundreds of traders he’s worked with throughout his career. Like me, I think you may find it of interest!
They all have a tested, positive expectancy system that’s proved to make money for the market type for which it was designed.
They all have systems that fit them and their beliefs. They understand that they make money with their systems because their systems fit them.
They totally understand the concepts they are trading and how those concepts generate low-risk ideas.
They all understand that when they get into a trade, they must have some idea of when they are wrong and will bail out. (more…)
Honesty & Experience in Trading
Honesty:
Trading introduces you to yourself and you can’t ignore it. The mentor was just being honest. He saw the guys impatience. The more emotionally the guy got about the reality of the situation the more angry the guy got. Trading is difficult because money is an imperfect feedback mechanism. The habits you create early on you may continue to pay for throughout your career even it if paid you in the beginning. The good habits you create may not pay you for awhile or you may not be able to see them paying off. It take a strong person to keep going without rewards.
Experience:
If I have learned one thing it is never to discount others experience. If someone has something to say I am smart enough to learn something from it. That does not mean that all experience are created equally efficiently. But completely discounting it is dangerous. About everything I have ever done I started off thinking I was smarter than everyone else. It started with my parents and continued to football and trading. Each step I got better. However it is important to take the information and make it work for you.
Cut Losses Short
Cut losses short is the sister rule to the let profit run, and is usually just as difficult to implement. In the same way that profitability comes from a few large winning trades, capital preservation comes from avoiding the few large losers that the market will toss your way each year. Setting a maximum loss point before you enter the trade so you know before-hand approximately how much you are risking on this particular position is relatively straightforward. You simply need to have a exit price that says to you this trade is a loser and I will exit before it gets any bigger. Due to gaps at the open, or limit moves in futures we can never be 100%
certain that we can get out with our maximum loss, but simply having the rules, and always sticking to it will save us from the nasty trades that just keep on going and going against our position until we have lost more than many winning trades can make back.
If you have a losing position that is at you maximum loss point, just get out. Do not hope that it will turn around. Given that trades are either winners or losers, and this one is shouting Loser at you, the chances that it will turn around and become a large winner is tiny. Why risk any more money on this losing trade, when you could simply close it out (accept the loss) and move on. This will leave you in a much better place financially and mentally, than holding the position and hoping it will go back your way. Even if it did do this, the mental energy and negative feelings from holding the losing position are not worth it. Always stick to your rules and exit a position if it hits your stop point.
Addictiveness
Trading is also highly addictive. When behavioral psychologists have compared the relative addictiveness of various reinforcement schedules, they found that intermittent reinforcement – positive and negative dispensed randomly (for example, the rat doesn’t know whether it will get pleasure or pain when it hits the bar) – is the most addictive alternative of all, more addictive than positive reinforcement only. Intermittent reinforcement describes the experience of the compulsive gambler as well as the future trader. The difference is that, just perhaps, the trader can make money.” However, as with most affective aspects of trading, its addictiveness constantly threatens ruin. Addictiveness is the reason why so many players who make fortunes leave the game broke.”
Adictiveness
“Trading is also highly addictive. When behavioral psychologists have compared the relative addictiveness of various reinforcement schedules, they found that intermittent reinforcement – positive and negative dispensed randomly (for example, the rat doesn’t know whether it will get pleasure or pain when it hits the bar) – is the most addictive alternative of all, more addictive than positive reinforcement only. Intermittent reinforcement describes the experience of the compulsive gambler as well as the future trader. The difference is that, just perhaps, the trader can make money.” However, as with most affective aspects of trading, its addictiveness constantly threatens ruin. Addictiveness is the reason why so many players who make fortunes leave the game broke.”