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Knowledge & Patience

 

Knowledge – A trader must put in the time and effort to study and learn the proper skills in order to be successful. Whether that is through technical or fundamental analysis, one must invest in their education. They must completely understand their market, and its ideal as a beginner to focus on one market and be a specialist. A part of the knowledge and education is devising a game plan or strategy for trading. Writing down your rules and sticking to your trading plan is a key to success.

Patience – A successful trader can sit on the sidelines for days waiting for the proper setup. They don’t jump into a trade just for the sake of trading. Yes there may be opportunities, but the smart trader waits for trades that meet their trading rules and system. Over trading by beginner traders is a big obstacle to overcome. A need to always be in the market will lead to taking trades that are likely too risky. Learn patience, it’s a key to success. A winning trader usually has an extraordinary amount of self control, and often the best trade is no trade.

Fast Easy Money

You know, it never stop puzzling me, why people think the stock market is a place for fast easy money.
J-LIf you had read Livermore, the guy’s puzzled too.
Let me quote an excerpt from Richard Smitten’s How to Trade Like Jesse Livermore
Livermore believed that the game of speculation is the most uniformly fascinating
game in the world. But it is not a game for the stupid, the mentally lazy, or the person of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor.
dinner-party-

Over a long period of years, he rarely attended a dinner party including strangers when someone did not sit down beside him and inquire after the usual pleasantries:
“How can I make some money in the market?”
In his younger days, he went to considerable pains to explain all the difficulties faced by the trader who simply wishes to take quick and easy money out of the market; or through courteous evasiveness, he would work his way out of the snare.
In later years, his answer became a blunt “I don’t know.” (more…)

Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week. (more…)

7 Points for Traders

  1. You don’t choose the stock market; it chooses you.  A little bit of early trading success can have a profound effect on a person’s soul.  If it does choose you, you’ll have to accept that your life and investing will become forever connected.7numbers
  2. Your methodology must provide an unshakeable foundation that you believe in totally, and you must have the conviction to trade based upon it.   If your belief is tentative or if you don’t have complete faith in your methodology, then a few bad trades will destabilize and erode your confidence. 
  3. A calm mindset that can focus on the execution and not on the outcome is what produces profits.  It takes total emotional control.  You must maintain your balance, rhythm and patience.  You need all three to stay in the game.
  4. The markets are always conniving with ingenious techniques to get you to lose your patience, to get you frustrated or mad, to bait you to do the wrong thing when you know you shouldn’t.  A champion doesn’t allow the markets to get under his skin and take him out of his game.
  5. Like a great painting, all good trades start with a blank canvas.  Winning traders first paint the trade in their mind’s eye so that their emotional selves can reproduce it accurately with clarity and consistency, void of emotions as they play it out in the markets.
  6. The “here and now” is all that matters.  You can’t think about the last trade or the last shot or worry about the future.  You need to put on your “amnesia hat” in order to remain completely unfazed by what came before.  Only by doing so can you be totally absorbed in executing your present trade.
  7. Being prepared and having put in the work results in the bringing together of your intuition and confidence.  The two go hand in hand.  Extraordinary results can be expected when you are able to see it, feel it and trust it. 

10 Great Quotes of Jesse Livermore

“Do not anticipate and move without market confirmation—being a little late in your trade is your insurance that you are right or wrong.” -Jesse LivermoreJL-ASR

“The good speculators always wait and have patience, waiting for the market to confirm their judgment.” -Jesse Livermore

“{Limit} interest in too many stocks at one time.  It is much easier to watch a few than many.” -Jesse Livermore

“Experience has proved to me that the real money made in speculating has been: “IN COMMITMENTS IN A STOCK OR COMMODITY SHOWING A PROFIT RIGHT FROM THE START. ” -Jesse Livermore

“As long as a stock is acting right, and the market is right, do not be in a hurry to take a profit. You know you are right, because if you were not, you would have no profit at all. Let it ride and ride along with it. It may grow into a very large profit, and as long as the “action of the market does not give you any cause to worry,” have the courage of your convictions and stay with it.” -Jesse Livermore

“It is foolhardy to make a second trade, if your first trade shows you a loss. ” “Never average losses. ” Let that thought be written indelibly upon your mind.” -Jesse Livermore

“One should never sell a stock, because it seems high-priced.” -Jesse Livermore

“Profits always take care of themselves but losses never do. ” The speculator has to insure himself against considerable losses by taking the first small loss. In so doing, he keeps his account in order so that at some future time, when he has a constructive idea, he will be in a position to go into another deal, taking on the same amount of stock as he had when he was wrong.” -Jesse Livermore
“It is significant that a large part of a market movement occurs in the last forty-eight hours of a play, and that is the most important time to be in it.” -Jesse Livermore

“A speculator should make it a rule each time he closes out a successful deal to take one-half of his profits and lock this sum up in a safe deposit box. The only money that is ever taken out of Wall Street by speculators is the money they draw out of their accounts after closing a successful deal.” -Jesse Livermore

Patience in Trading

The most important lesson I’ve learned over the years of trading is staying patient throughout the journey. There will always be loosing trades as well as winning trades, the key is not being greedy as well as staying consistently patient with the market whilst gaining experience.

Re-reading books, trading scripts as well as regularly topping up knowledge of all the relevant price action technicalities is crucial, although I’d say the main attribute to achieving consistent results is not only sticking to your own specific trading plan and rules, but remaining patient and never giving up. The use of repeated trading affirmations can help dramatically with this.

In the world of trading, those who remain patient over the years and ‘slowly but surely’ carve out a positive equity curve will surely gain the vital skills needed to make trading a full time, long term career.

Most traders have only the ‘destination’ in mind, with the ‘journey’ aspect as secondary. This is the wrong approach. Without the long journey testing your patience, including all the difficulties and hurdles, the destination would be too easy to obtain and everyone would be doing it. This is why learning to trade can be seen as easy, however its the journey that most amateur traders find too difficult to sustain. This can all be overcome with the right trading mindset and understanding.

:Anything that comes quick goes quick. Patience is required for outstanding results.

Gann's trading rules

  • Never risk more than 10% of your trading capital in a single trade.
  • Always use stop-loss orders.
  • Never overtrade.
  • Never let a profit run into a loss.
  • Don ‘t enter a trade if you are unsure of the trend. Never buck the trend.
  • When in doubt, get out, and don’t get in when in doubt.
  • Only trade active markets.
  • Distribute your risk equally among different markets.
  • Never limit your orders. Trade at the market.
  • Don’t close trades without a good reason.
  • Extra monies from successful trades should be placed in a separate account.
  • Never trade to scalp a profit.
  • Never average a loss.
  • Never get out of the market because you have lost patience or get in because you are anxious from waiting.
  • Avoid taking small profits and large losses.
  • Never cancel a stop loss after you have placed the trade.
  • Avoid getting in and out of the market too often.
  • Be willing to make money from both sides of the market.
  • Never buy or sell just because the price is low or high.
  • Pyramiding should be accomplished once it has crossed resistance levels and broken zones of distribution.
  • Pyramid issues that have a strong trend.
  • Never hedge a losing position.
  • Never change your position without a good reason.
  • Avoid trading after long periods of success or failure.
  • Don’t try to guess tops or bottoms.
  • Don’t follow a blind man’s advice.
  • Reduce trading after the first loss; never increase.
  • Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.

Money solves all of your problems.

What that phrase means is that who ever you are that day will show up in your trading.  This of course comes in varying degrees.

In many professions your emotional state may not effect your earnings or employment.  In trading, a “bad” day can  create a cascading effect. You lost when you should have made money.  You created a bad habit.  Losing doesn’t trigger the right response, etc.

A trader views the market through themselves.  Now, most of the time it is little things that can be easily passed over.  Human beings are always going to have to deal with things they rather would not have to.  Every person has a bad day.

Money solves all of your problems, till it doesn’t.  The difficult part about trading is the problems start and the money (win or loss) CAN come at different times.  Think about this concept another way, a headline comes out and the market reacts to it (or it is reasonable to think it is a catalyst).  Well it turns out the headline is old and everyone already knew about it.  The story/money and what it bears can often come at the “wrong” or different times.  You are rewarded or punished just not always easy to connect the actions in real time.

Money does not necessarily mean your actions are correct.  Yes over time it evens out but some run out of money, patience, emotional currency before it corrects.  They weren’t honest about who they were that day.  It is prudent to always look a gift horse in the mouth.

3 Mistakes that will kill your trading success

Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember.

Thinking trading is easy. It is not, there are times when it can be slightly less difficult after a lot of time, patience, and hard work. When I think to myself “this is easy” I lose my sharpness. My focus is adverted from my goal. I will lose. It may not be on that trade but maybe the next.

Thinking you have finished. There is only one thing that every trade is guaranteed to give me: a chance to learn about myself, the market, and the interaction between the two. You have to be willing to be relentless in your learning. It will enable you to learn the cheapest.