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 “money” tag
rss25 rules of trading discipline
- The market pays you to be disciplined.
- Be disciplined every day, in every trade, and the market will reward you. But don’t claim to be disciplined if you are not 100 percent of the time.
- Always lower your trade size when you’re trading poorly.
- Never turn a winner into a loser.
- Your biggest loser cant exceed your biggest winner.
- Develop a methodology and stick with it. dont change methodologies from day to day.
- Be yourself. Dont try to be someone else.
- You always want to be able to come back and play the next day. Once you reach the daily downside limit, you must turn your PC off and call it a day. You can always come back tomorrow.
- Earn the right to trade bigger. Remember: if you are trading poorly with two lots you must lower your trade size down to a one lot.
- Get out of your losers.
- The first loss is the best loss.
- Dont hope and pray. If you do, you will lose. (more…)
State of Mind
The goal of any trader is to turn profits on a regular basis, yet so few people ever really make consistent money as traders. What accounts for the small percentage of traders who are consistently successful is psychological—the consistent winners think differently from everyone else.
The defining characteristic that separates the consistent winners from everyone else is this: The winners have attained a mind-set—aunique set of attitudes—that allows them to remain disciplined, focused,and, above all, confident in spite of the adverse conditions.
Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful.They
no longer fear the erratic behavior of the market. They learn to focus on the information that helps them spot opportunities to make a profit, rather than focusing on the information that reinforces their fears.
You don’t need to know what’s going to happen next to make money; anything can happen, and every moment is unique, meaning every edge and outcome is truly a unique experience.
The trader that it’s his attitude and “state of mind” that determine his results.
Niall Ferguson, the Ascent of Money: A Financial History of the World
The Ascent of Money: A Financial History of the World by Niall Ferguson
“The shadow world of derivatives, credit-default swaps, the sales of U.S. bonds to China ; all seem to bring brilliant results, until they get too big.”
Great book ; go out there and buy it, thank me later 🙂
A word from Bruce Kovner
Bruce Kovner is one of the world’s most successful traders. The following below is extracted from his Market Wizardsinterview:
“A greedy trader always blows out. I know some really inspired traders who never managed to keep the money they made. One trader at Commodities Corporation – I don’t want to mention his name – always struck me as a brilliant trader. The ideas he came up with were wonderful; the markets he picked were often the right markets. Intellectually, he knew markets much better than I did, yet I was keeping money, and he was not.”
Q: So where was he going wrong?
“Position size. He traded much too big. For every one contract I traded, he traded ten. He would double his money on two different occasions each year, but still ended up flat”.
And, from further on in the interview:
“First, I would say that risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least in half. My experience with novice traders is that they risk three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks.”
Prudent risk control, combined with the power of compounding, can lead you a long way in this game.
If you trading ,then read this
Below, we share a presentation from Morgan Stanley’s Jim Caron, Measuring Risk: Extracting Market Sentiment from the Interest Rate Markets, in which the credit strategist provides a much more detailed framework of what critical credit signals are and how to interpret them. We recommend that all those still trading, either with their own, or other people’s money, familiarize themselves with this 27-page overview.
(Instead of Watching TV -Cricket Match -Movies ,Traders just read this -)
Consistent And Discipline
In order to realize the full potential of your trading systems it is critical that you take every trading entry, adjust every stop, and close out every trade as and when your system says you should do. This takes extreme confidence in your trading systems, good robust reliable technology, and the mental discipline to stick to your trading plan whatever happens.
An underlying assumption about being consistent and disciplined is that you have a pre-defined plan for every situation you may face in your trading, so that you know how you are defining what being consistent is. Your plan needs to include at least the following items: (more…)
Useful Thoughts To Counter Fear
– 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.
The 5 Fundamental Truths Of Trading
| If you hold these core trading beliefs you will tend to do well in trading: I. “Anything can happen” – the market can go up, down or sideways from any point and negate my edge; II. “You Don`t need to know what is going to happen next in order to make money” III. “To win in the markets you need an edge” – an edge is nothing more than an indication of a higher probability of one thing happening over another IV. “There is a random distribution between wins and losses for any set of variables that define an edge” V. “Every moment in the market is unique” – so the last trade is independent from the next |
10 Top Trading Commandments
Discipline trumps conviction. Don’t let your bad trades turn into investments.
Perception is reality in the market. Adapt your style to the market, and learn to accept the market as it is, not how you wish it was.
Play great defense, not great offense. Opportunities are made up easier than losses.
Don’t confine your thinking in terms of boundaries. Expect the extreme, and don’t miss major profit opportunities.
Know your companies. Hold your stock as long as it is performing properly, cut your losses fast, and don’t “hope” for a rebound.
Risk control is important. Always quantify your risk going into a trade.
Be diligent and thorough in your research. Do your homework, recap each day, and learn from your mistakes.
Don’t get caught in a situation in which you could lose a great deal of money for reasons you don’t understand.
Respect the price action, but never defer to it. When unsure, trade “in between.”
Emotion is the enemy when trading. Be greedy when others are fearful, and fearful when others are greedy.