Traders should work on replacing subjectivity with cut and dry analysis. Keep yourself in a box and stick with what you know. The markets are complicated enough without our tendency to over analyze. All a trader needs is to learn how to read a small number of indicators and trade them well. Find a niche; your own niche. Simplification not complication makes a successful trader. When contemplating a trade think first and foremost about how much you are willing to lose before you attempt to calculate your expected gain. A stock is, at any given time, in the process of testing a specific price level. Questions that make a trading decision valid: WHY are you considering a trade? WHEN will you enter it? WHERE do you see it going? Multiple time frame correlation is important for high probability trades. Let the chart tell you its story. OBEY your rules of engagement…ALWAYS. Be well paid to be a follower. Loss of mental capital (drive, will, confidence) is greater than loss of monetary capital. Let the price action CONFIRM your trade analysis. Example: let a break-out test the break-out first. Trading Errors: The “Fudge” Factor 1. Trying to catch a falling knife. 2. Picking Tops 3. Failure to wait for confirmation. 4. Lack of patience. 5. Lack of a clear strategy. 6. Failure to assume responsibility. 7. Failure to quantify risk. |
Archives of “niche” tag
rssDevelopment of trading expertise
1) Much of performance learning is the cultivation of positive habit patterns – If you have to make efforts to follow trading rules, that is effort not devoted to tracking markets. The key to success is turning rules into habits, so that they can be followed without effort, preserving mental capital for analysis and decision-making.this excellent New Yorker article on Toyota and the notion of kaizen. The path of kaizen is difficult to follow, but it’s a sure path to excellence.
2) The development of new habits opens the door to fresh ways of thinking and behaving – I’ve long noticed that successful traders periodically remake themselves and their trading, adapting to changing market conditions. They cultivate new habits, which aids them in developing new skills and ways of making money.
3) We will learn and perform best by making maximum use of our learning strengths – This is an extension of the notion of operating within a trading niche. If we’re engaged in a concerted program of learning and development, it makes sense to ground our efforts in learning competencies.
4) Performance improvement often occurs in small, continuous steps forward – This is an idea central to quality and performance improvement among manufacturing firms. The successful trader may set a single goal each trading session and track progress faithfully. Over the course of a year, that is hundreds of opportunities missed by the trader who lacks such goals. Take a look at
What makes an expert?
What makes an expert? And how can traders develop their own expertise? Three elements:
1) “Measures of general basic capacities do not predict success in a domain”
Experts cannot be distinguished by superior intellects or other cognitive talents.2) “The superior performance of experts is often very domain specific and transfer outside their narrow area of expertise is surprisingly limited”
Being an expert in one domain does not predict expertise in others; a person can be a highly accomplished trader, but not expert in other areas. Think “niche” — the successful trader has found a particular sphere of success that expresses his skills and interests.
3) “Systematic differences between experts and less proficient individuals nearly always reflect attributes acquired by the experts during their lengthy training”
The expert is one who has undergone a structured, deliberate process of training that builds competencies, offers extensive feedback, and draws upon intensive effort over time to internalize knowledge and skills. (more…)
What makes an expert? And how can traders develop their own expertise? Three elements:What's the difference between winning traders and losing traders?
Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners as well as losers have committed to doing this, and have no intention of ‘going 
back’. This same black-and-white mentality was evident in their personal lives too. But what about the differences? Here’s what Williams observed:
The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it’s closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it’s not moving – even if it’s not losing money at that time! There is also very little internal dialogue about trade selection and trade management; this group just takes action instead of suffering analysis paralysis. Finally, the winning traders focused their attention on a small niche in the market or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.
What's the difference between winning traders and losing traders?
Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners as well as losers have committed to doing this, and have no intention of ‘going back’. This same black-and-white mentality was evident in their personal lives too. But what about the differences? Here’s what Williams observed:
The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it’s closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it’s not moving – even if it’s not losing money at that time! There is also very little internal dialogue about trade selection and trade management; this group just takes action instead of suffering analysis paralysis. Finally, the winning traders focused their attention on a small niche in the market or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.
Trading Expert
What makes an expert? And how can traders develop their own expertise? Three elements:
1) “Measures of general basic capacities do not predict success in a domain”
Experts cannot be distinguished by superior intellects or other cognitive talents.2) “The superior performance of experts is often very domain specific and transfer outside their narrow area of expertise is surprisingly limited”
Being an expert in one domain does not predict expertise in others; a person can be a highly accomplished trader, but not expert in other areas. Think “niche” — the successful trader has found a particular sphere of success that expresses his skills and interests.
3) “Systematic differences between experts and less proficient individuals nearly always reflect attributes acquired by the experts during their lengthy training”
The expert is one who has undergone a structured, deliberate process of training that builds competencies, offers extensive feedback, and draws upon intensive effort over time to internalize knowledge and skills.
So what might this mean? Here are the good conclusions:
1) The majority of traders are looking for expertise in all (more…)
What makes an expert? And how can traders develop their own expertise? Three elements:What's the difference between winning traders and losing traders?
Well, first, there are a few similarities. Both are completely consumed by the idea of trading. The winners as well as losers have committed to doing this, and have no intention of ‘going back’. This same black-and-white mentality was evident in their personal lives too. But what about the differences? Here’s what Williams observed:
The losing traders have unrealistic expectations about the kind of profits they can make, typically shooting too high. They also debate with themselves before taking a trade, and even dwell on a trade well after it’s closed out. But the one big thing Williams noticed about this group was that they paid little attention to money management (i.e. defense).And the winners? This group has an intense focus on money management, and will voluntarily exit a trade if it’s not moving – even if it’s not losing money at that time! There is also very little internal dialogue about trade selection and trade management; this group just takes action instead of suffering analysis paralysis. Finally, the winning traders focused their attention on a small niche in the market or a few techniques, rather than trying to be able to do everything. Hopefully the second description fits you a little better, but if the first one seems a little too familiar, you now at least know how to start getting past that barrier.
10 Trading Mistakes
1. Under capitalization – One of the first mistake I made when beginning to trade was being under capitalized. I started with a $10K account without any idea on how to trade. You need enough capital to learn and gain the experience. Some like to call the initial stake “market tuition.” If you can avoid paying your dues, great for you. But most new traders will lose their money. Just make sure you learn from every loss.
2. Having the approach to trading as a “learn as you trade” – Big mistake. “Learn as you trade” = losing money. Losing money can lead to emotional and financial stress and may even create enough fear in you making it hard to trade. Make sure you come prepared to the battlefield. Be a strategist. Sun Tzu said, “The battle is won before it is fought.” Think about it.
3. Trading as a hobby – Take a look at your hobbies. Do they make money? Hobbies in general are entertainment that cost money. Do not approach trading as a hobby. Treat it like a business. Develop a business plan, have goals, and understand what you want out of trading.
4. Thinking that you know it all – The moment one thinks he knows it all is the moment he has become a fool. Its impossible to know everything about the markets. This is a lifetime learning process. Find your niche…. find your speciality and be an expert in it. In other words, find your edge. One thing I learned in trading is that niche = money.
5. Trading without a plan – One of the worst things you can do as a trader is to trade without a plan. Trading without a plan is like driving in a new area without a map or a navigation system. You are lost. (more…)
Making things your own way
It is not whether you can be a good trader, it is whether you can find the trading that is good for you.
When you have found your niche, you don’t need discipline to do the right things. You won’t want to do anything else.