10 Trading Thoughts

ten101. You only have three choices when you are in a bad position, and it is not hard to figure out what to do:
(1) Get out
(2) Double up, or
(3) Spread it off.

I have always found getting out to be the best of all three choices.

  1. No opinion on the market or you are doubtful about market direction? Then stay out. Remember, when in doubt, stay out.
  2. Don’t ever let anyone know how big your wallet is, and don’t ever let anyone know how small it is either.
  3. If you snooze, you lose. Know your markets, when they trade, and what reports will affect the market price.
  4. The markets will always let you in on the losers; the market’s job is to keep you out of winners. Dump the dogs and ride the winning tide.
  5. Stops are not for sissies.
  6. Plan your trade, then trade your plan. He who fails to plan, plans to fail.
  7. Buy the rumor and sell the fact. Watch for volatility in these situations; it usually marks tops or bottoms in the markets.
  8. Buy low, sell high. Or buy it when nobody wants it, and sell it when everybody has to have it!
  9. It’s okay to lose your shirt, just don’t lose your pants; that is where your wallet is.

One last thought to leave with you. It applies not only to every-day life but to trading the markets as well:
Success is measured not so much by the wealth or position you have gained, but rather by the obstacles you have overcome to succeed!

FRUSTRATION

 “Your success as a trader at times hinges on your ability to conquer frustration.  Frustration will always appear on the path toward greatness.  Some will triumph over it, while others succumb to its pettiness.  When you encounter obstacles on your trail toward achievement, remind yourself that they were placed there in order for you to overcome them, so you can learn from them and become better than you were before”

Hope

When the ship starts to sink, don’t pray. Jump.

Learning to take losses is an essential speculative technique. MOST never learn it. Take losses at once and move on. Take small losses to protect yourself from the big ones.
Beware the 3 obstacles to jumping ship:
– fear of regret ( that the loser will turn out to be a winner when you’ve bailed-out )
– Unwillingness to abandon part of an investment ( become willing to abandon )
– Difficulty of admitting you made a mistake.

Greed & Hope

Always take your profit too soon.

Sell too soon. Don’t hope for winning streaks to go on and on. Don’t stretch your luck. Expect winning streaks to be short. When you reach a previously decided-upon ending position, cash out and walk away. Do this even when everything looks rosy, when everyone else is saying the boom will keep roaring along.
The ONLY reason for not doing it would be that some new situation has arisen, and this situation makes you all but certain that you can go on winning for a while.
Except in such usual circumstances, get in the habit of selling too soon. And when you’ve sold, don’t torment yourself if the winning continues without you.

When the ship starts to sink, don’t pray. Jump.

Learning to take losses is an essential speculative technique. MOST never learn it. Take losses at once and move on. Take small losses to protect yourself from the big ones.
Beware the 3 obstacles to jumping ship:
– fear of regret ( that the loser will turn out to be a winner when you’ve bailed-out )
– Unwillingness to abandon part of an investment ( become willing to abandon )
– Difficulty of admitting you made a mistake.

The obstacles of the day trader are:

The obstacles of the day trader are:

Fear – Fear causes the day trader to hesitate and freeze when positions should be entered and exited. Fear can also cause day traders to take losses,

 Doubt – Doubt causes great opportunity to be missed and causes a mind to be scattered and without firm direction.

Greed – Greed will cause day traders to hold onto positions too long often causing profit to turn into loss.

Hope – Hope will cloud the eyes of probability. Hope is not for day traders.

The obstacles of the day trader are :

Fear – Fear causes the day trader to hesitate and freeze when positions should be entered and exited. Fear can also cause day traders to take losses,

 Doubt – Doubt causes great opportunity to be missed and causes a mind to be scattered and without firm direction.

Greed – Greed will cause day traders to hold onto positions too long often causing profit to turn into loss.

Hope – Hope will cloud the eyes of probability. Hope is not for day traders.

Wall of losses

obstacleIf you’re in the market, one of biggest obstacles you’ll face is the wall of losses. It’s fairly difficult to deal with the markets if you are not willing to lose. It’s almost impossible. It’s like wanting to be alive, but only wanting to breathe in and not breathe out.

When you want to be right, you’re not dealing with the obstacles. Instead, you’re forcing things. When you want to make a profit out of today’s trade, even though it’s a big loser, then you’re not dealing with today’s obstacle. Enjoy the obstacle, embrace it, and be willing to accept it. If the market tells you it’s time to get out at a loss, then do so.

Mark Douglas : Trading in the Zone

Without doubt the foremost reading, it seems, in trading circles. Douglas’ book, in my view, deserves its place at the top of a traders reading list. Whether you are trading currencies, commodities, stocks or futures this book will have something for everyone. The book tackles the psychology involved in being a successful trader. The book attempts to give the reader the tools to develop the Confidence and discipline to become and consistent winner.

I think the book is a superb read and although I cannot say right now how succesful it has been, it is one of the few books that I pick up nearly every day and read another chapter again and remind myself of some of Douglas’  inspiring ideas and thoughts.

The book ends with a great 20 trades learning excercise that is a must.

The key learnings I get from reading this book :

1)The market is random; you cannot predict it. Unless you know every individual who has a position in the market and you know their strategy for each trade it is impossible to know what will happen next.Give up trying to predict, and focus on the now moment and managing yourself , your money and your strategy.

2)The Power of Association. Douglas uses throughout the book a story about a boy and his fear of  dogs. He uses this analogy to describe how previous experiences that have given pain, or expected pain, to us will mean that our mind will do everything possible to protect itself from future pain when it is exposed to similar circumstances at some point again in the future. i.e. If you recognise a market pattern where previously you lost a trade you will be compelled to exit the trade at that point or not take that trade on; because you will not want to experience pain. Douglas again talks about the here and now and describes how we can overcome these internal obstacles.

101%….Don’t miss to Read this Book !!!!

10 Trading Thoughts

1. You only have three choices when you are in a bad position, and it is not hard to figure out what to do:
(1) Get out
(2) Double up, or
(3) Spread it off.

I have always found getting out to be the best of all three choices.

  1. No opinion on the market or you are doubtful about market direction? Then stay out. Remember, when in doubt, stay out.
  2. Don’t ever let anyone know how big your wallet is, and don’t ever let anyone know how small it is either.
  3. If you snooze, you lose. Know your markets, when they trade, and what reports will affect the market price.
  4. The markets will always let you in on the losers; the market’s job is to keep you out of winners. Dump the dogs and ride the winning tide.
  5. Stops are not for sissies.
  6. Plan your trade, then trade your plan. He who fails to plan, plans to fail.
  7. Buy the rumor and sell the fact. Watch for volatility in these situations; it usually marks tops or bottoms in the markets.
  8. Buy low, sell high. Or buy it when nobody wants it, and sell it when everybody has to have it!
  9. It’s okay to lose your shirt, just don’t lose your pants; that is where your wallet is.

One last thought to leave with you. It applies not only to every-day life but to trading the markets as well:
Success is measured not so much by the wealth or position you have gained, but rather by the obstacles you have overcome to succeed!

Kiev, Hedge Fund Masters

I took notes on Kiev’s book when I first read it, and I’m going to select four self-therapeutic passages from them for this post. I suspect that most of my notes are quotations, but I don’t think it’s important to check their accuracy, though I will provide page references.

* * *

By establishing a vision, you have promised to achieve something. The promise means you are giving yourself permission to begin to act in the realm of the impossible, to create all kinds of openings. In that one promise, you begin to abandon self-doubt and the need for approval. This way of being in the world lets loose huge reserves of energy and creates enormous possibilities. Yet none of this can happen until you take the first step forward in pursuit of a goal with no guarantee of outcome. (p. 218)

Living in the gap makes you vulnerable. Once you’re out there, on the cutting edge, you’ll suffer breakdowns as well as breakthroughs. Although it will not always be comfortable, living in the gap between where you are and where you want to be will make your days far more interesting and action packed than if you traded with the intention of avoiding pain and discomfort. (p. 229)

It is useful to note when an activity becomes tedious, dull, and routine and leads to withdrawal and avoidance. This is the time to consider whether you are facing obstacles and are retreating behind your survival needs or whether these feelings signify that you have reached your goal and now need to raise the stakes. (p. 236)

The development of mastery is, in a sense, an existential and experiential methodology, directed at what is and what can be. You invent your own future through commitment to a goal, identifying what is necessary to produce specific results, and learning how to handle the unknown. (p. 247)

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