In Trading, the STATISTICS show that smarts, experience, etc. are not the differentiating factor. So, what does make a difference?
These are many of the factors that allow some people to become monster traders over time. It’s not my opinion, just my observations. |
Archives of “monster” tag
rssTrading: The Difference Between Playing Offense & Defense
The sooner traders learn to carefully manage risk the better off they will be. So many new traders come in with only the thoughts of profits dancing in their heads. This is equivalent to a football team only focusing on scoring points and not planning their defense.In trading you must play both sides of the ball. You have to be able to score points against the market and not allow the market to score back those points on you.
Your entries are your offense and your exits are your defense.
Letting a winner run is your offense, cutting your loser short is your defense.
Your automatic buy stop is your offense and your automatic stop loss is your defense.
Buying a monster stock is an offensive move, planning on how you will exit with your profits is your defensive move.
Identifying a trend is your offensive play creating a trading plan on how to trade it is your defensive play.
Your choice on what to trade is playing offense, choosing your position size is playing defense. (more…)
Finicky Traders are Good Traders
In trading focus is crucial. You have to know who you are as a trader and exactly what your method and trading plan is, and you must follow it. In trading discipline makes money, focus makes money, monster stocks make money, while risk management allows you to keep the money that you have made. You could say you must be finicky to be a good trader.
Here are the areas to be finicky about:
- A good trader is picky about the methodology they decide to trade, they study diligently to see what works before they begin trading.
- Be very picky about the stocks you trade, only trade the very best monster stocks long and only short the absolute biggest junk stocks.
- Being picky about your entry point is crucial, stick with your plan, buy only when the odds are in your favor for winning.
- You can not just trade any amount of stock, you have to be picky about the quantity of shares you trade and base it on your risk management guidelines.
- Be very picky about who you follow on twitter, look for a teacher not a stock picker, beware of big egos. (more…)
Trading: The Difference Between Playing Offense & Defense
The sooner traders learn to carefully manage risk the better off they will be. So many new traders come in with only the thoughts of profits dancing in their heads. This is equivalent to a football team only focusing on scoring points and not planning their defense.In trading you must play both sides of the ball. You have to be able to score points against the market and not allow the market to score back those points on you.
Your entries are your offense and your exits are your defense.
Letting a winner run is your offense, cutting your loser short is your defense.
Your automatic buy stop is your offense and your automatic stop loss is your defense.
Buying a monster stock is an offensive move, planning on how you will exit with your profits is your defensive move.
Identifying a trend is your offensive play creating a trading plan on how to trade it is your defensive play.
Your choice on what to trade is playing offense, choosing your position size is playing defense.
Your watch list is playing offense choosing how much capital to risk on any one trade is playing defense.
In trading your wins are not permanent and your profits can be taken back, when you score you have to next ensure that you are not scored on. The goal of keeping your profits has to be far above the desire for making quick money with big risk.
The Wisdom of Jesse Livermore
Here are seven lessons from Jesse Livermore who is considered by many as one of the greatest traders who ever lived.
Lesson Number One: Cut your losses quickly.
As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. Risk management should dictate the size of the trade and how much you can lose. Deciding where to exit when a position is going against you is not a winning strategy.
Lesson Number Two: Confirm your judgment before trading a larger than average position.
Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed by it going in his favor. Once the stock was traveling in the direction he desired, Livermore would maximize his trading size for out sized wins.
There are many ways to add to a winning position — pyramiding up at key pivot points, building a position as the trade goes in your favor, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade – never when it goes against you. Never add to a losing position.
Lesson Number Three: Watch leading stocks for the best action.
Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game. Shorting monster stocks is a very dangerous undertaking when they are under accumulation by large funds. (more…)
Trading: The Difference Between Playing Offense & Defense
The sooner traders learn to carefully manage risk the better off they will be. So many new traders come in with only the thoughts of profits dancing in their heads. This is equivalent to a football team only focusing on scoring points and not planning their defense.In trading you must play both sides of the ball. You have to be able to score points against the market and not allow the market to score back those points on you.
Your entries are your offense and your exits are your defense.
Letting a winner run is your offense, cutting your loser short is your defense.
Your automatic buy stop is your offense and your automatic stop loss is your defense.
Buying a monster stock is an offensive move, planning on how you will exit with your profits is your defensive move.
Identifying a trend is your offensive play creating a trading plan on how to trade it is your defensive play. (more…)
Using Hope & Fear Correctly in Trading
In trading most new traders allow hope and fear to dictate their trading. They have a losing trade and instead of selling it and getting out they instead hope it will come back to even allowing the loss to grow. Another error for new traders is that when they have a winning trade they fear that the profit will disappear so they sell for a small gain and miss the big trend in their favor. When hope and fear controls the trader they end up with big losses and small gains. A formula for ruin. Instead the rich trader is fearful of losses getting bigger so they sell quickly when losing, risking a maximum of 1% of their capital on any one trade. Rich traders are able to think clearly and trade rationally knowing exactly what they are risking, when their stop is hit, they get out. This enables them to keep all their losses small. When a trade is immediately a winner for a rich trader they hope it will run 100 points in their favor. Rich traders enable this to be possible with a trailing stop, they do not get out of a winning trade until a key price reversal has happened that tells them that the trend is actually reversing. Rich traders are fearful of losses growing bigger and hope that their winners will continue on a monster trend. This mindset allows them to be on the right side of trends and avoid any huge losses. This is why the best traders in the world are trend followers and win consistently. Do you want to join their club? Then do not let fear and hope dictate your trading decisions use them correctly. |
The Difference: Mediocrity vs. Greatness
In Trading, the STATISTICS show that smarts, experience, etc. are not the differentiating factor.
The BEST (most successful guys I know and work with) have winning %’s of less than 50%.. actually, the average is between 45-55% but the point is, basically, winning percentages don’t matter – so they might as well be a random event.
So, what does make a difference?
- CONVICTION in ideas
- INTERNAL CONFIDENCE
- TRUSTING YOURSELF
- GETTING BIG IN TRADES you believe in
- LETTING WINNERS RUN
- CUTTING LOSERS QUICKLY
- SWITCHING DIRECTIONS QUICKLY
These are many of the factors that allow some people to become monster traders over time. It’s not my opinion, just my observations.
What is Luck & What is Skill in Trading?
Luck is picking the right stock and riding it up for great profits, skill is knowing when to get out and lock in profits.
Luck is returning 20% in one month, skill is returning over 20% a year for 5 straight years.
Luck is making money in a bull market, skill is making money in a bear market.
Luck is making money when the market matches your perma bull or perma bear style, skill is making money in both bull and bear markets.
Luck is picking one monster stock, skill is picking three monster stocks back to back.
Luck is having one big bet pay off for huge profits, skill is surviving 200 straight trades and not blowing up your account.
Luck is surviving the market while not knowing what you are doing, skill is acquired after you have done your homework.
So, do you have skills as a trader or have you just been lucky? So far………
Overcome Indecisive Trading- Take 5 Steps
Admit it. Face up to what it is. Call it a slump, call it shattered confidence, call it a big scary market monster. Whatever “it” is, you have to get it on the table so you can deal with it.
Seek help. Maybe you shouldn’t go it alone. Without some accountability, it’s easy to relapse. Find a mentor or some coaching to get you back on track, and add some skills to your repertoire. The fact of the matter is that left to your own abilities as they currently stand, you may very well be facing a similar situation again.
Take inventory. Take an inventory of what’s left of your capital, both in terms of cash and confidence. It may be that you simply don’t have enough left to consider a comeback right away, so perhaps you incubate for a while and prepare in other ways for your eventual return. Or perhaps you assess your situation and realize you have more than enough to start the process.
Get uncomfortably familiar with the cause. What was it that put you in need of recovery to begin with? Overconfidence? Lack of respect for the market? A series of small mistakes which compounded your problems? Understanding the root cause of your wounds, even if painful, will help you prevent it from happening again in the future. After all, you’ve already paid the tuition, you might as well get the lesson.
Get back in the saddle. The last step in the sequence is to return to trading and begin rebuilding. Start thinking about what that’s going to look like for you and how you’ll avoid the same pitfalls which got you this time around. Visualize yourself back in the routine again, making plays, staying disciplined, and having success.