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During and After the Trade

  
  Education
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1. What’s your game plan if it goes against you and threatens your survival?

2. Will you be able to get out? Did you take that into account in your workout?

3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?

4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?

5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?

6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?

7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others?

8. Are you at equilibrium in your personal life? You’re not as talented as Tiger Woods, and you probably won’t be able to handle distressed calls for money or leaks on the home front. Are you sure that if you’re losing you won’t get hit on the head with a 7-iron, or berated until you have to give up at the worst possible time?

9. After the trade did you learn anything from the trade?

10. Are you organized sufficiently to have a record of all your trades for your accounting and learning?

11. Should you modify your existing systems based on it?

12. How does recency and frequency and value affect your future?

13. Did you fit your after activities to your mojo?

14. If you made a good profit, did you take some capital out of the fray for a rainy day?

15. Have you learned to say “fair” whenevever anyone asks you how you’re doing and are you sure that you don’t spend a fortune after a good trade, and dissipate your profits with non-economic activities?

16. Is there a better use for your time than monitoring the ticks or the market every minute of the day if you do, and if you don’t, do those who do so and have much faster and better equipment than you have an insurmountable advantage against you?

Stop It

  
  Education
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There’s an old joke about the investor who never used any stop losses. His friend knew his big positions were getting crushed.
Out of concern, the friend asked, “How are you sleeping?”
“Like a baby” he answered.
“Really? You aren’t nervous or upset?”
“I sleep like a baby” he repeated.
“That’s amazing. I’d never be able to sleep through the night with those types of losses.”
“Who said anything about sleeping through the night? I said I slept like a baby: I wake up every two hours, wet myself and cry for 30 minutes before falling back to sleep.”
That’s why risk management is so critical: to save you from sleeping like a baby, and in the long run to save you a lot of money.
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There’s a reason flight attendants show you where the emergency exits are before takeoff. The same thinking should apply to investors. Prudent investors have a sell strategy in place beforethey get involved with a stock. Using any of these stop strategies helps keep your emotions out of the process when an investing emergency arises.

12 Signs You’re in a Bad Trade

  
  Education
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  1. Your entry is based on your opinion not a valid signal.
  2. Your bet is that a trend will change with no reason behind the bet.
  3. You are entering out of greed after a big move.
  4. If you are wrong about the trade you will suffer a huge loss.
  5. You enter a trade with no stop loss.
  6. You enter a trade with no exit strategy to bank any profits.
  7. You enter based on someone’s opinion.
  8. You enter a trade because you are bored.
  9. You are trading a market you have done zero back testing or chart studies on.
  10. You are trading futures or option contracts you do not understand.
  11. You are trading with confidence even though you have zero confidence.
  12. You have no idea what the hell you are doing.

MURPHY’S LAWS FOR TRADERS

  
  Education
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1. It is morally wrong to allow a sucker to keep his money 
2. Everyone has a trading strategy that won’t work 
3. For every expert who says prices are going up, there is one who says  they are going down 
4. If you can drink it, don’t trade it 
5. The market is not logical; it is psychological 
6. The successful speculator is one who dies before his time comes 
7. If you drop a dead cat far enough, it will bounce 
8. The market goes your way the day after your stop was hit 
ITS COROLLARY 
9. The big move begins the day after your option expires 
10. He who sells uncovered options goes broke 
11. If you feel like doubling up a profitable position, slam your dialing  finger in the drawer until the feeling goes away 
12. The perfect strategy works every time until you start using it 
13. If your strategy seems to be working well, you haven’t been using it  long enough 
14. The guy who owns the horse when it dies is the loser 
15. When it comes to luck or skill, you can’t beat luck  (more…)

Do You Want to Be Right or Make Money?

  
  Education
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“The market is always right and price is the only reality in trading. If you want to make money in any market, you need to mirror what the market is doing. If the market is going down and you are long, the market is right and you are wrong. If the market is going up and you are short, the market is right and you are wrong. Other things being equal, the longer you stay right with the market, the more money you will make. The longer you stay wrong with the market, the more money you will lose.”

10 characteristics found in Best Traders

  
  Education
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  1. They all have a tested, positive expectancy system that’s proved to make money for the market type for which it was designed.
  2. They all have systems that fit them and their beliefs. They understand that they make money with their systems because their systems fit them.
  3. They totally understand the concepts they are trading and how those concepts generate low-risk ideas.
  4. They all understand that when they get into a trade, they must have some idea of when they are wrong and will bail out.
  5. They all evaluate the ratio of reward to risk in each trade they take. For mechanical traders, this is part of their system. For discretionary traders, this is part of their evaluation before they take the trade.
  6. They all have a business plan to guide their trading. You must treat your trading like any other business.
  7. They all use position sizing. They have clear objectives written out, something that most traders/investors do not have. They also understand that position sizing is the key to meeting those objectives and have worked out a position sizing algorithm to meet those objectives.
  8. They all understand that performance is a function of personal psychology and spend a lot of time working on themselves. You must become an efficient rather than inefficient decision maker.
  9. They take total responsibility for the results they get. They don’t blame someone else or something else. They don’t justify their results. They don’t feel guilty or ashamed about their results. They simply assume that they created them and that they can create better results by eliminating mistakes.
  10. They understand that not following their system and business plan rules is a mistake.

5 Naked Truth about Trading

  
  Education
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  1. Anything can happen.
  2. Does not need to know what’s going to happen next to make money.
  3. Random distribution between wins and losses for any given set of variables that defines an edge
  4. Edge is nothing more than an indication of a higher probability of one thing happening over another
  5. Every moment in the market is unique.

If you truly believe in this as well, I’d encourage you to write this down and look at it every day before you look at your charts. Make it a point to remember, embrace and apply it.

Quetions after the Loss

  
  Education
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When you take a hit, you have got to think your way through it logically.

Questions to ask yourself when you have taken a hit.

What is the lesson here???

What did I learn????

How can I avoid this next time????

What is my strategy the next time I encounter this situation????

Did I remember to pat myself on the back for the good trades this month?????

Did I remind myself that I have had many more successes this month??????

Did I remind myself that this is just an opportunity to do it better next time?????

Did I use proper discipline????????

Did I wait for a proper trade set-up??????

Did I follow my trading rules????????

How long am I going to wallow here???????

Did I remind myself that the market is very generous and will always give me plenty of opportunities for profit???????

Do I have more money now than I did at the beginning of the month????

If YES, you are ok.
You are out to win the war, though you may lose a few battles.

If the answer is NO and you are consistently taking hits,
then STOP and RETHINK your strategy, There is something WRONG!

No one can tell you how to trade; all they can do is share their experience and you will have to tweak it to fit your trading style. Thinking through your losses logically will give you the best advantage over reacting emotionally .

The Pain is Unjustified

  
  Education
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pain-I’ve always said, you don’t have to blow out an entire account before we figure out the significance of being disciplined. You don’t need to feel pain to learn that lesson. You just have to commit to the process of becoming disciplined. It poses a more fundamental question, are you willing to do what it takes to become consistently profitable?

How do we overcome this pain and impulsiveness? Through belief in a system, and a full understanding of the probabilities. You MUST embrace loss as a part of this profession, if you don’t you are in the wrong industry. Do not place another trade. This belief comes with repetitions. The belief has to be earned through proof and practice.

Before you proceed with your next trade, I want you to think about the power of your MIND. (more…)

W. D. GANN’S 24 TIMELESS STOCK TRADING RULES

  
Analysis, Education
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1. Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one-tenth of your capital on any one trade.
2. Use stop loss orders. Always protect a trade.
3. Never overtrade. This would be violating your capital rules.
4. Never let a profit run into a loss. After you once have a profit raise your stop loss order so that you will have no loss of capital.
5. Do not buck the trend. Never buy or sell if you are not sure of the trend according to your charts and rules.
6. When in doubt, get out and don’t get in when in doubt.
7. Trade only in active markets. Keep out of slow, dead ones.
8. Equal distribution of risk. Trade in two or three different commodities if possible. Avoid tying up all your capital in any one commodity.
9. Never limit your orders or fix a buying or selling price.
10. Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits.
11. Accumulate a surplus. After you have made a series of successful trades, put some money into a surplus account to be used only in emergency or in times of panic.
12. Never buy or sell just to get a scalping profit.
13. Never average a loss. This is one of the worst mistakes a trader can make.
14. Never get out of the market just because you have lost patience or get into the market because you are anxious from waiting.
15. Avoid taking small profits and big losses.
16. Never cancel a stop loss order after you have placed it at the time you make a trade.
17. Avoid getting in and out of the market too often.
18. Be just as willing to sell short as you are to buy. Let your object be to keep with the trend and make money.
19. Never buy just because the price of a commodity is low or sell short just because the price is high.
20. Be careful about pyramiding at the wrong time. Wait until the commodity is very active and has crossed resistance levels before buying more, and until it has broken out of the zone of distribution before selling more.
21. Select the commodities that show strong uptrend to pyramid on the buying side and the ones that show definite downtrend to sell short.
22. Never hedge. If you are long one commodity and it starts to go down, do not sell another commodity short to hedge it. Get out at the market: Take your loss and wait for another opportunity.
23. Never change your position in the market without a good reason. When you make a trade, let it be for some good reason, or according to some definite rule; then do not get out without a definite indication of a change in trend.
24. Avoid increasing your trading after a long period of success or a period of profitable trades.

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