- Never risk more than 10% of your trading capital in a single trade.
- Always use stop-loss orders.
- Never overtrade.
- Never let a profit run into a loss.
- Don ‘t enter a trade if you are unsure of the trend. Never buck the trend.
- When in doubt, get out, and don’t get in when in doubt.
- Only trade active markets.
- Distribute your risk equally among different markets.
- Never limit your orders. Trade at the market.
- Don’t close trades without a good reason.
- Extra monies from successful trades should be placed in a separate account.
- Never trade to scalp a profit.
- Never average a loss.
- Never get out of the market because you have lost patience or get in because you are anxious from waiting.
- Avoid taking small profits and large losses.
- Never cancel a stop loss after you have placed the trade.
- Avoid getting in and out of the market too often.
- Be willing to make money from both sides of the market.
- Never buy or sell just because the price is low or high.
- Pyramiding should be accomplished once it has crossed resistance levels and broken zones of distribution.
- Pyramid issues that have a strong trend.
- Never hedge a losing position.
- Never change your position without a good reason.
- Avoid trading after long periods of success or failure.
- Don’t try to guess tops or bottoms.
- Don’t follow a blind man’s advice.
- Reduce trading after the first loss; never increase.
- Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.
Archives of “money” tag
rss"SUGGESTIONS OR COMMANDMENTS"
Have you written down your trading rules? Do you have rules for entry and for exit with a profit and with a loss? Do you have a rule telling you whether a market is trending and what the trend is? Do you have rules stating when the market is in a trading range and what that range is? Do you have rules saying what markets you will trade and what has to happen to trade them?
Or do you simply shoot from the hip and call it artistry or intuition? Does this work for you?
Do you follow your rules rigidly without flexibility or discretion? Does this serve you over time?
Do you abandon your rules in the heat of trading, only to regret it? Do you stubbornly go against your rules thinking this time you know better? What would happen if you didn’t do this?
Some people don’t like rules. They don’t want to be told what to do even if it’s themselves telling themselves what to do. They even more don’t like following rules that came with a system for which they paid good (any or excessive) money. They have a polarity response to direction even after it becomes apparent that they’d be more profitable simply following the rules.
Others like to be told what to do, but somehow their rules are conflicting, obscure, or so bound up with discretion as to be meaningless. These traders may not even be aware that in essence they have no rules.
Whatever your situation turns out to be, it may be helpful to think in terms of commandments or suggestions. You may think in terms of absolute rules or simple guidelines.
Do you like clear directions as to what to do? In this case you can think in terms of commandments. For example, when The Ten Commandments says, “Thou shalt not kill,” it doesn’t leave much discretion. Reword your rules as commandments that are precise and clear and easy to follow.
Do you resist being dictated to and bossed around by outside forces? In this case, reformulate your rules as guidelines or suggestions. Give yourself some leeway in certain situations. Reword it so that when you read it, it sounds like a good idea and not a demand.
However, be certain in advance that whether you choose a suggestion or command, the results will be profitable if followed consistently or even most of the time. There’s nothing worse than a bad idea or a rule that doesn’t work. Remember the basics: Find out what works. Verify that it works. And do it.
10 Things A Trader Needs to START DOING …To Mint Money
There are many trading principles that are common among successful rich traders. It is important to learn the things that allow them to win so we can follow in their footsteps and make money. There are 10 things that new traders can start doing tomorrow to improve their results immediately. If you have been trading for awhile but have not been profitable these may be things that you need to start doing to stop losing money.
1. Start trading the price action by using charts. The market doesn’t care about your opinions but the chart expresses the collective actions of all market participants. Learn to understand what the chart is saying.
Start to understand that the market determines whether any single trade wins or loses not you and not an imaginary “they”.
2. We can only surf the price waves not control them.
Start to take 100% responsibility for your losses.
3. You enter the trade, you exit the trade, the wins and losses are yours alone. The blame game is a losing game in the markets.
Start to bounce back from losing trades quickly, move on don’t ruminate.
4. If your position size and risk management are correct no one losing trade should emotionally devastate you it should be only one of the next hundred trades with little significance by itself.
Start caring more about what the market is doing and less about what you think it should be doing.
5. ALL that really matters is current price action not your opinion of what might be price action later. (more…)
Optimism & Pessimism
Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.
Optimism can be a speculator’s enemy. It feels good and is dangerous for that reason. It produces a clouding of judgment. It can lead you into a venture with no exits. Even when there is an exit, optimism can persuade you not to use it.
You should never make a move if you are merely optimistic. Before committing your money to a venture, ask how you will save yourself if things go wrong. Once you have that worked out, you’ve got something better than optimism. You’ve got confidence.
Analysing yourself
“At the end of each trading day (week) you shouldn’t focus solely on your P/L. Instead, focus on your thought process during the day and how well you executed your plan. If you consistently execute your trades according to plan and still lose money, then you need to reevaluate your approach. While there is definitely a cyclical rhythm to the market, no strategy will always work. You need to constantly and objectively review what is working and what is not so you can make necessary adjustments to you plan.”
Six Rules of Michael Steinhardt
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.
2. always make your living doing something you enjoy: Devote your full intensity for success over the long-term.
3. be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.
4. make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.
5. always trust your intuition: Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.
6. don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.
Ego and Impatience
Ego: I never feel the need to prove myself to anyone by saying that I am always right, or that I am some trading genius that has it all figured out, nobody is. But I have one friend in particular that thinks he can trade in stocks, yet every trade he has ever made has been a complete failure, but you could never get him to admit it. He has more excuses and more reasons why he thinks he is still right, even though he constantly losing money. Leave your ego out of the markets, admit when you’re wrong, and stay humble when you’re right.
Impatience: Not having enough patience has forced me to put on some horrible trades, having patience has lead to some of my most profitable ones. Pretty self explanatory.
The Fallacy Of Higher Effort = Higher Returns
Every week I will try to dedicate some time to answering questions that readers and members send in to me.
First off, thank you again for letting me know what is on your mind and for pointing out topics I need to discuss further. While I’m not able to answer all of the questions submitted, I have read each one submitted to me and will be looking for opportunities to share information that will be helpful to you in the coming weeks.
Today just covering one question sent by one Trader.
Q: The harder I try, the more money I lose. What’s going on?
A: This is a fairly common phenomenon which is why we have to learn how to adapt to market conditions and be patient with our strategies. Just because you “try harder” doesn’t mean that your profits will expand equally in relation to your effort. While effort helps create and sustain an edge, at the end of the day you still need the market to cooperate with whatever you are doing.
The best analogy I can provide here is one that many golfers are familiar with. If you’ve ever golfed in high winds, you know that your score will often be higher. Some of this, obviously is due directly to the windy conditions (which you have no control over). (more…)
Lose the bad attitude ,Better attitude equals better decisions
You can’t be a winner in the markets or in life if you don’t also have a winning attitude and surround yourself with those who offer the same. It is far too easy when the chips are down and our strategies are out of sync to start beating ourselves up and feel like a worthless moron. That comes with the territory. If it would be easy, everyone would be making loads of the money in the market and we know that isn’t true as most can’t even keep up with the S&P. Remember, trading and investing is not a precise science and a lot more luck is involved than many will tell you. So, in this business, when you fall down, you’ve got to dust yourself off and get back on the horse and, more importantly, keep plugging away. When you start thinking negative thoughts, and we all do, stop them immediately. You can’t consistently win in the markets if you can’t consistently foster and maintain a positive attitude in everything you do.
Trading markets without knowledge
Trading without adequate knowledge of the markets and self is foolish because by doing so you are gambling. There are traders that subconsciously want to lose money. I used to be that way, I think. I believe that my problem was I didn’t do much research or preparation. So essentially deep down I didn’t feel I deserved the money. There is a certain amount of self-knowledge needed to choose the proper trading method. It has even been suggested that many small traders in the futures market, without knowing it, secretly want to lose. They jump in with high hopes – but feeling vaguely guilty. Guilty over ‘gambling’ with the family’s money, guilty over trying to get ’something for nothing,’ or guilty over plunging in without really having done much research or analysis. Then they punish themselves, for these or other sins, by selling out, demoralized, at a loss.