- Managing your risk, you will not be around to win if you do not control your risk per trade. How many losses in a row can you survive? Surviving the market is magic at times.
- Trading a consistent methodology is magical because you will be consistent enough to make money when a market environment rolls around that it works in, single trades by themselves mean nothing outside the context of a method.
- Trading a methodology you believe in will enable you to trade it through draw downs instead of giving up.
- Understanding your edge will enable you to have the mental toughness to trade knowing eventually you will get the pay off.
- Trading price action versus your own opinion will help you magically be on the side of the majority most the time.
- Trading in the direction of the trend will enable you to be right more times than wrong most of the time.
- Cutting losses short and letting winners run will make you profitable. Now that is the magic of asymmetry.
- Only trading in markets and trading vehicles you understand will keep you safe from many big mistakes.
- Doing nothing when you do not know what to do is a plan that will save you much money.
- Spending thousands of hours studying charts, reading books from successful traders, and doing the right homework will make you successful eventually so all your friends can tell yo how lucky you are. Then you can tell them that is isn’t magic, trading is a lot of hard work.
Archives of “much money” tag
rssPatience
1) If you insist on trading during unstable or volatile markets, keep your positions small.
2) If you go into cash, don’t get upset on days when we rally, it’s simply part of the game.
3) Don’t buy or sell stocks because someone else is doing it. Have your OWN plan, find a philosophy that works for YOU, and don’t blindly follow anyone!
4) Wait for the wind to be at your back. Right now, it’s swirling. No sense in forcing trades to make a few pennies when there are dollars to be made in better environments.
5) Let the market correct, let the dust settle, don’t be in such a rush to trade. I see too many people trying to bottom-fish this market and I feel like screaming: “You don’t have to trade!”
I am not saying all this to be an ass. I simply want traders to learn from my mistakes. I have lost too much money in the past by forcing trades in unfavorable environments. You are better off protecting your capital and more importantly, protecting your confidence. Wait for proper bases to form, wait for some institutional accumulation, and wait for sentiment to be “less bullish.” In other words, wait for a healthier environment…it might not be that far away. The key right now is discipline and patience.
Trading Wisdom From Jesse Livermore
Don’t Avoid Exit Strategies
“It was the same with all. They would not take a small loss at first but had held on, in the hope of a recovery that would let them out even. And prices had sunk and sunk until the loss was so great that it seemed only proper to hold on, if need be a year, for sooner or later prices must come back. But the break shook them out, and prices just went so much lower because so many people had to sell, whether they would or not.”
Jesse Livermore
Hope, Fear and Greed
“The spectator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day and you lose more than you should had you not listened to hope. And when the market goes your way you become fearful that the next day will take away your profit, and you get out too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.”
Jesse Livermore
10 Big Lies Traders always says…
1. The losing position wasn’t my fault, the market 2. The trade was right and the market wrong. 3. I just have bad luck. 4. Eventually the stock will go up (or down)… eventually. 5. Bigger size equals bigger profits. 6. No need to close the postion just yet.I can average down. 7. Because I made so much money on the last trade I can take on more risk the next. 8. If the market is going down I can’t make any money. 9. I need to trade a larger account in order to be a better trader. 10. I’ve had many winners in a row, so now I need a big loser. |
On Trading Psychology
The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you you hope that every day will be the last day — and you lose more than you should had you not listened to hope — to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and get out — too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.
Trading Psychology
- Are you trading because you want to trade? Consider trading a business not a game.
- Are you not trading? This is the opposite of trading too often. You may be so scared of taking a loss that you avoid trading altogether.
- If you get stopped out of several stocks, walk away.Paper trade until the profits return.
- Follow the system.Would you be making more money if you followed your trading signals? Understand why you’re ignoring the signals you receive.
- Don’t overtrade.Sometimes the best place for cash is in the bank. You don’t HAVE to trade.
- Learn from mistakes. Review your trades periodically. It’ll uncover bad habits.
- Focus on the positive. The loss your suffered today pales to the killing you made last week.
- Ignore profits. If you find yourself getting nervous about a winning trade or making too much money, then concentrate not on the bottom line but on improving your trading skills. Get used to making too much money.
- Obey your trading signals. Otherwise, what are you trading for? Plan your trade and trade your plan.
- Don’t trade when you’re upset.This also goes for being too excited.
- Abandoning a winning system. Don’t become bored with your winning system and search for new, more exciting ways to lose money.
10 Obstacles to Success for Traders
1 Greed, the urge to make as much money as possible, and fear that he will lose it all.
2 Low confidence in himself or his strategy, which makes him enter or exit trades at the wrong time. Low self esteem is also a problem; lots of people are natural victims and believe that they will probably fail, and of course this is what they do.
3 Middle class guilt that makes the trader believe that he should not make super profits because it is morally wrong.
4 Overconfidence. Feeling that after so many winning trades he is invincible.
5 Disbelief. He believes that high rewards cannot possibly be true, and “If trading is that easy, then everyone would be doing it.” He then looks for complicated strategies in the belief that it cannot be easy.
6 Paranoia, believing that the market is conspiring against him.
7 Reward for effort, where he feels that people should be rewarded fairly for the effort that they put in. FX trading does not operate with these rules and that is confusing. The reward can be disproportionately high or can result in punishing losses, and is not dependent on just the work put in.
8 Insecurity, resulting in changing a strategy that is actually winning. All strategies must be tested and then consistently applied in order to engender confidence.
9 The urge to trade simply because he is a trader. This impatience results in entering trades when no real opportunity exists.
10 Low expectation; people with a low expectation of life tend to be less successful. Even though they may be highly intelligent, they aim for less and settle for less. (more…)
Hope, Fear and Greed
The spectator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day and you lose more than you should had you not listened to hope. And when the market goes your way you become fearful that the next day will take away your profit, and you get out too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.
Waiting for the market to make sense
There seems to be an ever increasing chatter about how the market is going to revert to the mean or it is broken or it is undervalued. Whatever it is let me remind you of two important ideas that are found in about any book you will ever read around finance and investing.
The market can stay irrational longer than you can stay solvent and the market’s goal is to extract the most money from the largest group of people.
If I could change the first quote it would say: The market is almost always irrational but when it is rational it pays you enough to forget.
Obviously not an easy sell if you running money. But that does not mean you can not be profitable. In fact, it means the exact opposite. The market gives everyone a chance to win but how much and what you did leading up to that point is the difference.
I would change the second quote to read: The goal of a market is to be healthy, when it is searching for participation equilibrium much money changes hands often to the few that are prepared.
There are many unnatural things that happen to a market. But underlying it wants to find participation equilibrium. It means cutting out the weakest leading the strong lower and allowing the few to pull everything higher. The problem is cycles are getting shorter and power is not as concentrated. If you are confused, imagine how confused the market must be.
Do I think it is important to have those conversations from the start of the post? Yes. But they should be focused on what to do. If the market does x I will look to do y or z and will be more focused on doing z but if m happens I will look more closely at y. (more…)
Trading Psychology
Are you trading because you want to trade? Consider trading a business not a game.
Are you not trading? This is the opposite of trading too often. You may be so scared
of taking a loss that you avoid trading altogether.
If you get stopped out of several stocks, walk away. Paper trade until the profits return.
Follow the system. Would you be making more money if you followed your trading
signals? Understand why you’re ignoring the signals you receive.
Don’t overtrade. Sometimes the best place for cash is in the bank. You don’t HAVE
to trade.
Learn from mistakes. Review your trades periodically. It’ll uncover bad habits.
Focus on the positive. The loss your suffered today pales to the killing you made last
week.
Ignore profits. If you find yourself getting nervous about a winning trade or making
too much money, then concentrate not on the bottom line but on improving your
trading skills. Get used to making too much money.
Obey your trading signals. Otherwise, what are you trading for? Plan your trade and
trade your plan.
Don’t trade when you’re upset. This also goes for being too excited.
Abandoning a winning system. Don’t become bored with your winning system and
search for new, more exciting ways to lose money.