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How to become contrarian?

  
  Education
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contrarian11. Come to the market with a trading plan. Most traders don’t have a plan built around high odds trade set ups. Thus, they trade random patterns.

2. Put in the necessary work. You can’t be like most traders and just show up to the markets expecting to make big money in a short period of time. Don’t be like most traders; become contrarian. It takes hard work and study. Prepare yourself to trade well.

3. Enter on reactions, not on breakouts. Most traders see the market begin to move and then jump in. These dog-piling events are made-to-order for professional traders to act. They unload when the herd is buying, and stock up when it is selling. Adopt a professional’s attitude and look to sell into strength and buy into weakness.

4. Work on the mental side of trading, not just the technical side. Understanding how to read the chart is vital, of course. But it is not enough. Once the technical side is learned, trading becomes 100% psychological. Most traders think psychology is unimportant until it is too late. Be contrarian and put time in to learning the mental skills needed to trade well.

5. Keep learning. Not just about the markets but about your own performance, too. Most traders take a losing trade and sweep it under the rug. They try to forget about it. Likewise, they don’t bother to study their winning trades. They have little idea of why one trade worked and another didn’t. Be contrarian: review your trading and keep a journal.

Becoming contrari (more…)

Costly Mistakes!

  
  Education
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Oops!!A system’s purpose is to ensure that we do not miss a breakout when a real trend comes, because missing a really strong trend is lethal – so lethal that we are willing to pay the price of many small losses, just in case the real one emerges.

Each entry doesn’t guarantee a profit, in fact, each entry likely becomes losses. However, the odds is that if you follow it consistently, in the long run, you come out ahead.

Day Trading & Poker

  
  Education
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PokerandtradingI learned how to play poker at a very young age.  You don’t just play every hand and stay through every card, because if you do, you will have a much higher probability of losing. You should play the good hands, and drop out of the poor hands, forfeiting the ante. When more of the cards are on the table and you have a very strong hand — in other words, when you feel the percentages are skewed in your favor — you raise and play that hand to the hilt.If you apply the same principles of poker strategy to trading, it increases your odds of winning significantly.
I have always tried to keep the concept of patience in mind by waiting for the right trade, just like you wait for the percentage hand in poker. If a trade doesn’t look right, you get out and take a small loss; it’s precisely equivalent to forfeiting the ante by dropping out of a poor hand in poker. On the other hand, when the percentages seem to be strongly in your favor, you should be aggressive and really try to leverage the trade similar to the way you raise on the good hands in poker.

How to Set Goals for Your Trading

  
  Education
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Do you have a written goal of what you expect to make from your trading this year? 

If you do, you’re among three in 100 who have any goal in writing. Writing out your goal allows your mind to define exactly what you want from your trading.  Once you define a dollar amount you will make for the year, you can break that goal down into what you need to make each month, each week and each day on average.  Your goals should not be just monetary.  Your goals sheet should also list other areas like improving your percentage of winning trades, widening the size of your winners or reducing the size of your losers.  Another good goal is reviewing your processes daily to stay sharp.  I’m sure you can think of other areas you’d like to improve.  Write one goal down NOW while you’re thinking about it!

Goals focus our attention and our energy to give our efforts a clear direction. Without a clear direction, your efforts will not be unified and your results will not be reaching anywhere near your true potential.  Setting goals gives the trader a feeling of control over what actions to take to accomplish a goal.  This allows traders to grow beyond past limiting beliefs or fears that had previously held them back.

One of the best acronyms I have seen is to set SMART goals – take the goal you wrote down earlier, and make sure it qualifies as SMART:

S – Specific – Goals must be specific, defining exactly what you want to achieve.

M – Measurable – You must be able to measure if your goal is being achieved, to give you the clear feedback you need to stay on track. 

A – Achievable – Goals should be ambitious but they should also be attainable.  You have to possess the belief that you can achieve the goal in order to

R – Relevant – Your goal must be personally important to you in order to increase the odds that you will be driven by the goal to accomplish it.

T – Timeline – You must have a deadline date to completion, which focuses you on the steps needed and time required in order to fulfill your objective.

Monitor goals daily and change your plan if you’re not getting the results you expected.  And once you achieve your goal, celebrate your accomplishment – and then set another goal!

Speculation -Defination

  
  Education
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Speculation by definition requires some amount of loss otherwise the game is fixed. However, I believe loss can be broken down into avoidable loss and unavoidable loss. Unavoidable loss is, well, unavoidable. But in my personal experience (and based on pretty much all speculative loss I have seen or read about) all avoidable speculative loss is traced back to some core elements/violations: not being disciplined (many interpretations), getting emotional and all of the associated errors and mistakes that brings, sizing positions too big so that regardless of odds you eventually have to reach ruin, not being consistent in your approach (the switches), not managing your risk adequately either via position sizing or stop losses, finally you have to be patient for the right pitch whatever that may be for you. 

Think Like Las Vegas

  
  Education
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Do you think of each trade as an island, as the great hope, or do you think in terms of probabilities over a series of trades? Casinos make their money by keeping the odds in their favor over a large number of bets. And that’s how successful traders think too. They don’t get attached to the success or failure of any given trade. Their primary goal is to stay calm, relaxed and open to the market’s opportunities so that they can execute their edge precisely and keep the odds in their favor. Thats why I make such a big deal about emotional clearing and staying calm. The emotional clearing technique I use is literally worth tens of thousands of dollars to me in bottom line results.

The Ten Tasks of Top Traders

  
  Education
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  1. Daily self analysis:   Successful trading is 40% risk control and 60% self-control.
  2. Daily mental rehearsal:   Practice being disciplined in your mind before you trade daily.
  3. Developing a low risk idea:   Trade with the odds on your side with a defined risk.
  4. Stalking:   Wait for the entry. Utilize patience and don’t pull the trigger to soon.
  5. Action:   Take the entry when the signal is hit. Do not freeze up. Be definitive.
  6. Monitoring:   Keep an eye on what is happening with your position.
  7. Abort:  Be ready to cut your losses, when you are wrong and hit your stop loss.
  8. Take profits:  Use trailing stop or profit target when one is hit. Allow the market to take you out.
  9. Daily briefing:   Think through your trading & what you did right/wrong based on your trading plan.
  10. Periodic review:   Is your trading working? Do adjustments need to be made?

Gambling vs. Trading

  
  Education
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The expectancy in gambling is ALWAYS terrible, while market speculation at times offers outstanding opportunities.  To get a 2:1 or 3:1 opportunity in gambling, one needs to accept incredibly low odds of victory.  In financial markets, those 2:1 or above opportunities come around like clockwork and offer high enough probability that long-term positive expectancy is possible.  Not only that, but the market speculator has the opportunity to adjust his or her position after the game begins…when was the last horse race where you could take a little off the table after the first turn?  Or reclaim most of your bet when your horse stumbles out of the gate?

Mastering Reward/Risk

  
  Education
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riskrewardMost traders ignore reward/risk ratios, hoping that luck will save them when things start to go bad. 

 This is probably the main reason so many of them are destined to fail. It’s really dumb when you think about it, because reward/risk is the easiest way to  get a definable edge on the market house. 

 The reward/risk equation builds a safety net around your open positions. It’s designed to tell you how much can be won, or lost, on each trade you  take. The secondary purpose is to remove emotion so you can focus squarely on the cold, hard numbers. 

 Let’s look at 15 ways that reward/risk will improve your trading performance. 

 1. Every setup carries a directional probability that reflects a specific pattern. Always execute positions in the highest-odds direction. Exit your trades  when a price fails to respond according to your expectations. 

 2. Every setup has a price level that violates the pattern. Only take trades where price needs to move a short distance to hit this “risk target.” Look the  other way and find the “reward target” at the next support or resistance level. Trade positions with the highest reward target to risk target ratios.  (more…)

Specific Observations for Traders

  
Economy, Education
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  • If you find yourself holding a winning position, adding up your profits, and confidently projecting larger gains on the horizon, you are probably better off exiting the trade. The odds are that the trade has run its course.
  • When entering a trade with a market order and your fill is clearly better than expected, odds are it will end up being a losing trade. Good fill, bad trade. Get out!
  • If all your ‘trading buddies’ agree with your expectations regarding the next big move, it probably will not work out. If everyone’s conviction level is as strong as the consensus, do the opposite.

 

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