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Could you Trade Full Time?

  
  Education
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Take this quick quiz and honestly determine if you are built to trade full time:

  • Are you properly capitalized?
    I wouldn’t suggest anyone start to think about trading full time until they have at least six figures that can be used solely for trading. Living expenses must come from other income or saved funds. Without six figures (and the more then better), I suggest you continue to build your stake.
  • Are you a successful part time trader?
    Why do you think you can succeed being a full time trader if you haven’t made money as a part time trader? Have you built your own stake to six figures trading part time? If so, you pass this question with flying colors.
  • Have you developed a system that works?
    Does your system have a     positive expectancy? Have you back tested the system (I don’t hold too much weight to this question)? Do you understand position sizing and do you implement it properly so you don’t blow-up with one or two trades?
  • Does your system offer enough opportunity?
    Without opportunity (multiple trading signals per day/ week), you will not be able to achieve your system’s expectancy. A lack of opportunity may skew your results and turn your anticipated positive expectancy to a negative expectancy and cause you to go broke.
  • Can you handle your emotions?
    How do you handle your emotions now with longer term positions or part time trading? Do you follow your rules, all the time? Will you have pressure to make money every month, week or day? Can you handle being alone (most cases) and staring at a computer for large portions of the day?
  • Finally, do you have spouse or other influence that will interfere with your endeavor?
    A spouse, friend or family (member) can have a negative affect on your trading that may result in subconscious sabotage.     Outside negative forces or nagging pressure people may lead you down a path that is not controllable because you are trying to prove something rather than “just trade” based on your acquired skills. Make sure the closest people in your life support you while making the move to full time trading.

Emotional Discipline

  
  Education
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asr1
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.”

Symptoms Of A Bad Stock Trader

  
  Education
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Ultimately the only sign of a bad trader that counts is if you’re losing money, but there are some individual signs and characteristics of a bad trader. See if you possess any of them.

  1. Your only news source is Blue Channels
  2. You can’t get over missed trades/opportunities. 
  3. You don’t track your trades.
  4. You’re opposed to learning new techniques.
  5. You have trouble breaking off bad trades.
  6. You put too much stock in what others think. 
  7. You panic and sell every time you see red.
  8. You only buy on green days.
  9. You blame other traders for your stock’s bad performance.
  10. You use every indicator known to analyze a stock. 
  11. You don’t know what stops are.

Let me know what you think. Are there any other symptoms of a bad trader?

Trading Wisdom

  
  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.

—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.

"6 Skills For Traders"

  
  Education
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Whether it is day trading, scalping, or investing,there are fundamental skills that each trader should master. Skill-building activities will help you sharpen your ability to make money and cash in on critical market movements.
1. Don’t Be a Perfectionist
Consistent profits are achieved from winning more than you lose – not winning every single trade.There are plenty of professional traders who generate profits by winning just 10% of their trades by maximizing gains and minimizing their losses.
2. Stick to a Trading Plan
Developing a trading plan is extremely important.Day trading around your own set plan for each position will produce consistent profits. A trading plan planner should be your best friend when developing your own trading
style. The key is sticking to what you’ve written down on paper.
3. Know the Odds
You should know the payoff odds for each trade that you take.Scalping produces large gains from small movements with higher risk than swing trading. Your trading plan should include a way to regulate how much capital you’re willing to risk on each position – but you should never risk more than 2% of your total account value. (more…)

4 Trading Mistakes

  
  Education
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1.  Do the Math
 

Sit down and go over your expected Risk to Reward Ratio for each trade.  If you have already been trading for a period of time sit down and analyse how much you are making each trade and your winning %.  These two numbers will help you formulate a solid profit goal.  No trading strategy works 100% of the time so you need to work out how much you lose per losing trade vs. how much you make per winning trade and then figure in your percentages.  From there you should have a realistic idea of how much you can expect to make in through your trading. 

2.  Don’t Expect Instant Returns
 

Trading is a business and like any other business it requires not only capital investment but time investment as well.  It takes time to find your rhythm and develop your trading skills.  Try not to be to hard on yourself during the learning phase and remember to focus on the positive aspects of your trading.  The vast majority of traders lose money and this number is even higher with traders who are just starting out.  Factor this in when you are setting your goals.

3.  Skill vs. Profits
 

Try to come up with goals that are not directly tied to your P&L statements.  For example, set a goal of following your rules for every trade for an entire trading day.  Once that is completed shoot for an entire week, then a month, and pretty soon you will be doing following your rules without even realising it.   Train yourself to develop your trading skills and reward yourself when you reach those goals. 

4.  It Takes Money
 

It takes money to make money.  Small accounts are fantastic for testing out whether or not trading is for you but when you get serious and want to go full time make sure you have enough capital to support your business.  Solid traders should expect to make 8% in the market over the course of a month.  That equates to 96% over a given trading year.  Make sure this figure allows you to have the lifestyle that you are expecting. 

Emotions

  
  Education
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Emotions are at the root of trading problems. Yes, emotions can interfere with concentration and performance, but that doesn’t mean that they are a primary cause. Indeed, emotional distress is as often the result of poor trading as the cause. When traders fail to manage risk properly, trading size that is too large for their accounts, they invite outsized emotional responses to their swings in P/L. Similarly, when traders trade untested patterns that possess no objective edge in the marketplace, they are going to lose money over time and experience an understandable degree of emotional frustration. I know many successful traders who are fiercely competitive and highly emotional. I also know many successful traders who are highly analytical and not at all emotional. Trading is a performance field, no less than athletics or the performing arts. Success is a function of talents (inborn abilities) and skills (acquired competencies). No amount of emotional self-control can turn a person into a successful musician, football player, or trader. Once individuals possess the requisite talents and skills for success, however, then psychological factors become important. Psychology dictates how consistent you are with the skills and talents you have; it cannot replace those skills and talents.

Trading Rules for Thirsty Traders

  
  Education
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“Don’t ever put your ego out there where you’re afraid to say that you’re wrong, because the market is right and you are wrong. Respect that.”

 “If you’re right at the wrong time, you’re wrong.”

 “The markets are like water. They will flow to the weakest point that they can push through, and they always do.”

“The market is smarter than you will ever be, with its combined knowledge of all participants. Pay attention to the signs. Be quick to admit that you’re wrong. Don’t be afraid to miss something.”

 “I believe money is fascist. It craves stability more than anything else. Nothing bothers money more than uncertainty.”

Trade Your Plan

  
  Education
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After yesterday’s close, we received an e-mail from a long-time subscriber, who asked us the following question, “When you see a position that is going against you and the market is dropping, and you are losing money on a trade, but your stop loss hasn’t been hit yet, how do you stay with the position? What is your secret? Do you pullback and look at the big picture or do you simple assume its all noise as long as it doesn’t hit that lower low? This is my biggest problem with tracking your trades and most of the time you are right in holding on.” … Because we thought our answer to his question may be beneficial to other traders as well, we wanted to share our reply to his e-mail, which was…

“The key point you stated is ‘but your stop loss hasn’t been hit yet.’ When we put on a trade, it’s like entering into a contract, so we try to stay the course and simply follow the plan. Over the years, we’ve found it’s best to stick with our original analysis because we usually plan a trade at night, or in the pre-market, without the stress of live trading. During the trading session, in the heat of the moment, there is so much pressure that we have to fight the voice in our heads telling us to sell the position when everything around is crumbling. It basically comes down to planning the trade and trading the plan…easier said than done, right? Sometimes, if you have a feeling things are going bad, and you’re an active trader, you can maybe sell 1/4 or 1/3 of the position to ease your mind. However, you must have the discipline to get back in once the coast is clear. Try to lay out a plan, write it on paper, and stick to it. The one thing every trader must accept, in order to be successful, is a loss. You must be fully prepared to lose what you’re risking. Once you accept losses as part of the trading game, the pressure to be right is not so intense.

The Stock Market Is An "Attractive Nuisance" And Should Be Closed

  
Analysis, Education
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Submitted by Charles Hugh Smith from Of Two Minds

The Stock Market Is An “Attractive Nuisance” And Should Be Closed

The dark pool of parasitic scum known as the stock market is an “attractive nuisance” that should be shut down.

In tort law, an attractive nuisance is any potentially hazardous object or condition that is likely to attract the naive and unwary, i.e. children.

A classic example is an abandoned swimming pool half-filled with fetid water.

Since many stock market investors are demonstrably naive about the risks and unwary of the dangers posed by the stock market (the proof of this is that they remain invested in the market), it is but a slight extrapolation of the attractive nuisance doctrine to declare the stock market is clearly an “attractive nuisance” and should be closed immediately.

Is this really a legal stretch? Consider the conditions that characterize an attractive nuisance. I have edited these to pertain to the stock market and investors:

1. The market is one in which the Powers That Be (the exchanges, the Central State, the central bank, et al., the effective “owners” of the stock market) know or have reason to know that brainwashed or ill-informed investors are likely to risk their money in.

2. The market is one of which the Powers That Be know or have reason to know (and fully realize or should realize) will involve an unreasonable risk of financial loss or ruin to such investors.

3. The investors, because of their consumption of officially sanctioned propaganda and misrepresentation of market risk and return, do not discover or realize the risk involved in placing money in the stock market. (more…)

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