1) Capacity for Prudent Risk-Taking – Successful young traders are neither impulsive nor risk-averse. They are not afraid to go after markets aggressively when they perceive opportunity;
2) Capacity for Rule Governance – Successful young traders have the self-control needed to follow rules in the heat of battle, including rules of position sizing and risk management;
3) Capacity for Sustained Effort – Successful young traders can be identified by the productive time they spend on trading–research, preparation, work on themselves–outside of market hours;
4) Capacity for Emotional Resilience – All young traders will lose money early in their development and experience multiple frustrations. The successful ones will not be quick to lose self-confidence and motivation in the face of loss and frustration;
5) Capacity for Sound Reasoning – Successful young traders exhibit an ability to make sense of markets by synthesizing data and generating market and trading views. They display patience in collecting information and do not jump to conclusions based on superficial reasoning or limited data.
Archives of “money” tag
rssTRADING 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.
Traders need 3 Keys
#1 Trading is not about winning percentage, being right all the time, or predicting the future. What it is about is having bigger winners than losers. If you are profitable after each long string of trades then you are a winning trader in that time frame. You can make money through winning percentage as long as you keep losers small and you can make money through huge wins even with lots of losses. The key is not how many times you are right but the size of your winners versus your losers. That is the magic elixir of profitability.
#2 Trading is first and foremost about surviving, the vast majority of traders not only don’t make money but they lose most of their trading capital. The only way to have a long profitable trading career is to manage risk and survive a string of losses. If your trading losses are more than 1% to 2% of total trading capital per losing trade you are in danger of blowing up your account with a string of losing trades or one big loss. To make the journey from new trader to successful trader you have to survive losing streaks and completely unexpected market action. Trading and betting big will eventually take you out of the game, it is only a question of when.
#3 Trading is one of the roughest things a person can do mentally and emotionally. Even if you win in the markets you have to keep up a large amount of personal human capital in perseverance, passion, dedication, focus, and faith in self and system. If you are missing one of these six psychological elements the odds will be against you. You have to cultivate your goals and drive into a vision of success that you are willing to pursue until you get it and pay the price as you go to have the prize you seek.
Ed Seykota’s 6 Rules from the Whipsaw Song
1. Do not be overly concerned about whipsaws a good trend pays for them all.
A whipsaw is when you enter a position but get stopped out quickly when the market reverses opposite to your position. If you are a trend trader this may happen many times in a row in a range bound market. This can be very frustrating to a trader and it may cause them to completely change their method. The fact is that one really good trend will pay for all of these whipsaws as long as you keep your losses small, and if you change your system you lose the benefit of that big trend.
To avoid whipsaw losses, stop trading. -Ed Seykota
2. When you catch a Trend, ride it to the end.
Your system must be able to take a position in a trending market, but then also be able to ride that trend to the end. Most new traders will jump out of trades before they are finished trending because they are scared the market has gone too far and will take back their paper profits. Let a trailing stop take you out of a trade when the trend is over, and only exit once you are stopped out.
“The trend is your friend except at the end where it bends.” -Ed Seykota (more…)
What do you think which is the most important mistake in trading that we should avoid among these?
1. Trading with money you can’t afford to lose
2. The need to be “certain”
3. Words that will kill you! HOPE—WISH—PRAY
4. Not Acting on your plan
5. Not knowing how to get out of a losing trade
6. Having an ego
7. Falling in love with a sector or script
The Ten Trading Commandments
1) Trade for success not for money.
2) Strive for discipline.
3) Know yourself and how well you handle risk.
4) Lose your ego.
5) Know your risk level and when you hit your stop point exit the trade.
6) Know when to trade and when to wait.
7) Love your losers like you love your winners.
8) Losing trades will be your best teachers.
9) After three losing trades in a row, take a break.
10) Don’t break any of the above nin rules.
Win or Lose -It's Upto You
If you want to win then you must create your own trading plan and follow it, if you want to lose just trade whatever you want whenever you want based on your own opinion.
If you want to win then you must control your risk carefully with only 1% or 2% of your capital at stake in every individual trade, if you want to lose then just trade huge position sizes, put all your chips on the table.
If you want to win plan your entries and exits before you enter a trade then follow them, if you want to lose ask for everyone’s opinion and just make decisions based on other people.
If you want to win cut your losses short and let your winners run, if you want to lose hold your losers and hope that they come back and sell your winners quickly to lock in gains.
If you want to win trade only the best high quality stocks in the market, if you want to lose trade the junk and hope for a miracle come back.
If you want to win then build complete confidence for your system through chart studies and back testing, if you want to lose trade with no idea of if what you are doing even works.
If you want to win go with the current trend of the market, if you want to lose fight the trend and trade against it.
If you want to win then go long the hottest stocks in a bull market, if you want to lose short the hottest stocks in a bull market.
Do what makes money not what you feel like doing.
Great lines from :Ed Seykota
“In The Trading Tribe, Ed extends his paradoxical insights about trading and life. ‘We need to experience our feelings. If we resist them, we wind up creating dramas in our lives and in our trading so that we have to experience them.'”
“Everyone knows traders who violate their rules, second guess their systems, give up on winners, stick with losers, and swear they won’t do it again…. Rather than counseling strength, steely discipline, or automation, Ed again turns apparent common sense on its head,. He encourages traders to embrace and celebrate their feelings, especially the ones they are unwilling to feel.”“‘Win or lose, everybody gets what they want from the market. Some people like to lose, so they win by losing money….'”
John D. Rockefeller Quotes
John D. Rockefeller is said to have been the richest person in history, even if he lived today. He left us with some wise quotes, check them out:
I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature.
If your only goal is to become rich, you will never achieve it.
It is wrong to assume that men of immense wealth are always happy.
The most important thing for a young man is to establish a credit… a reputation, character.
I know of nothing more despicable and pathetic than a man who devotes all the hours of the waking day to the making of money for money’s sake.
Don’t be afraid to give up the good to go for the great.
Don’t blame the marketing department. The buck stops with the chief executive.
Good leadership consists of showing average people how to do the work of superior people.
I always tried to turn every disaster into an opportunity.
I believe in the dignity of labor, whether with head or hand; that the world owes no man a living but that it owes every man an opportunity to make a living.
These are some very wise quotes from the richest man in history.
Let the market make the decisions, not your ego.
The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let’s call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven’t identified the ego’s ways will eventually be destroyed in the market because of their ego’s tendencies. It is just that powerful. The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.