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Profile Of The Successful Trader

  
  Education
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Trading is being young, imperfect, and human – not old, exacting, and scientific. It is not a set of techniques, but a commitment. You are to be an information processor. Not a swami. Not a guru. An information processor.

Participating in the markets can only develop your trading skills. You need to become a part of the markets, to know the state of the markets at any given time, and most importantly, to know yourself. You need to be patient, confident, and mentally tough.

Good traders offer no excuses, make no complaints. They live willingly with the vagaries of life and the markets.

In the early stages of your trading career, pay attention not only to whether you should buy or sell but also to how you have executed your trading ideas. You will learn more from your trades this way.

Never assume that the unreasonable or the unexpected cannot happen. It can. It does. It will.

Remember, you can learn a lot about trading from your mistakes. When you make a mistake – and you will – do not dwell on the negatives. Learn from the mistake and keep going.

Never forget that markets are made up of people. Think constantly about what others are doing, what they might do in the current circumstances, or what they might do when those circumstances change. Remember that, whenever you buy and hope to sell higher, the person you sell to will have to see the same opportunity at that higher price to be induced to buy.

Traders who lose follow one of several typical patterns. Some repeatedly suffer individual large losses that wipe out earlier gains or greatly increase a small loss. Others experience brief periods during which their trading wheels fall off: they lose discipline and control and make a series of bad trades as a result.
Wise traders make many small trades, remain involved, and constantly maintain and sharpen their feel for he market. For all of their work, they hope to receive some profit, even if it is small in terms of dollars. In addition, continual participation allows them to sense and recognize the few real opportunities when they arise. These generate large rewards that make the effort of trading truly worthwhile.

At the end of the chapter he lists specific observations that have a high enough probability of reoccurring he considers them rules:

  • 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.

7 Things You Must Do to Win at Trading.

  
  Education
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1. Managing the risk of ruin.
Do not risk so much on any one trade that 10 losing trades in a row will destroy your account. risking 1% to 2% of your trading capital per trade  is a great baseline for eliminating the risk of ruin.
2. Only trade with a positive risk/reward ratio.
Only take trades where your possible reward is at least two or three times the amount of capital you are risking in the trade.
3. Always trade in the direction of the prevailing trend.
Always trade in the direction of the flow of capital for your specific time frame. Shorting rockets and catching falling knives is not profitable in the long run.
4. Trade a robust system.
Back test and study your trading method, system, or style to ensure it is a winning system historically. The key is that it had bigger winners than losers over the long run in the past.
5. You must have the discipline to take your entries and exits as they are triggered.
You must take your entries when they trigger, your losses when they are hit, and your profits when a run is over to be a successful trader.
6. You must persevere through losing periods.
All successful traders were able to overcome their losing periods to come back and make the big money. If you quit you will not be around for the opportunity to win big.
7. If you want to be a winning trader you must follow your trading plan not your fear and greed.
Emotions will undo a trader more than anything else. Trading too big is due to greed, missing a winning trade due to no entry is a sign of fear, traders must trade the math and probabilities not their own opinions or emotions.

How do *your* coping efforts work for you?

  
  Education
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How about after you have a few winning trades, days, or weeks in a row? Do you trade better or worse? Breaking down your performance as a function of recent performance will tell you a great deal about how effective you are in coping with risk and reward.

The other excellent indicator of whether your coping is working for you is your emotional experience during trading. If you find that anxiety, overconfidence, frustration, and stress are pushing you into poor decisions, you know that you’re not coping well with the uncertainties of markets.

Finally, it is helpful to identify the sequences of coping behaviors that you utilize when you’re making good decisions and the sequences when you’re trading poorly. Knowing how your individual coping responses come together to form coping strategies can help you cultivate your coping strengths.

Tracking how you deal with challenges when you are at your most effective enables you to create a mental model of that coping that you can call upon during periods of high stress. We cannot avoid the stresses of trading, but those do not have to generate distress and biased decisions.Take a look at how well you trade after a position has gone against you. Do you trade better after a drawdown or worse?

10 Trading Lessons

  
  Education
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  1. Trading affects psychology as much as psychology affects trading.
  2. Emotional disruption is present even among the most successful traders.
  3. Winning disrupts the trader’s emotions as much as losing.
  4. Size kills.
  5. Training is the path to expertise.
  6. Successful traders possess rich mental maps.
  7. Markets change.
  8. Even the best traders have periods of drawdown.
  9. The market you’re in counts as much toward performance as your trading method.
  10. Execution and trade management count.

Two Facts

  
  Education
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anirudhsethithougts
Iam tracking Indian Stock Market and Global Market since 1992.Yes after 17 years ..I had seen these are two real facts of Trading.

#1: Small-range market periods lead to large-range market periods. Low volatility breeds high volatility, which in turn leads to low volatility.
Just about the time everyone is resigned that market conditions will never change is exactly when conditions will change.
#2: Trading is a business where you can never be right. Never. No matter what we do, our mistakes will always outnumber our correct decisions. That’s why grading ourselves on every minute` decision will come up with more of a batting average score than college test score.
Mistakes can always outnumber correct actions… so long as correct actions outweigh mistakes. It ain’t the size of our right or wrong actions that counts: it’s how much they weigh in $$ values. Size does matter.
The great news is, as traders we never have to be perfect. We don’t even have to be 50% perfect. We only need to maximize our wins and minimize our losses. And we only need to win once per day, more days than not to be good. Just barely profitable = the top ten percentile of our profession. Anything beyond that is outperforming 90% of the field.

Explanatory Style

  
  Education
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pessimist-optimistThe way you respond to winning and losing periods will depend largely upon your explanatory sytle.How do you ex-plain misfortune ?How do you explain good fortune ?In short ,are you basically optimistic or pessimistic in regards to trading ?

When a good thing happens to an optimist ,he says it’s permanent ,pervasive and personal.When a good thing happens to pessimist ,he says it’s temorary ,specific ,and not personal.Conversely ,when a bad thing happens to an optimist ,then he says it’s temporary ,specific ,and not personal.When a bad thing happens to a pessimist ,he says it’s permanent ,pervasive ,and personal.

Losses

  
  Education
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losses-ASRLosses are a simple cost of doing business. Don’t try to justify a bad trade by convincing yourself that it will sooner or later turn into a good trade. Accept losses easily!  Successful traders are able to ride through downturn periods. The confidence in their methods reassures them about their future success. 
The markets offer endless and plentiful possibilities. Missed opportunities  exist only in your mind. Prices keep changing and generate other opportunities. The goal of trading is make a net profit after a sequence of trades. It is, therefore, necessary to accept some losses and to look forward without punishing oneself. 

Market Timing

  
  Education
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“Market timing is the art of making investment decisions using indicators and strategies to observe and determine the direction of prices. Many believe that market timing involves predicting the future, when in reality, the goal of market timing is to participate in periods of price strength and avoid periods of price weakness.?

Profitability -Market Timing

  
  Education
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How often you are right on a trade is only half of the equation. The other half is how much do you make when you’re right and how much you lose when you’re wrong. You can remember that with this formula: Probability (odds of it going up or down) x Magnitude (how much it goes up or down) = Profitability.

“Market timing is the art of making investment decisions using indicators and strategies to observe and determine the direction of prices. Many believe that market timing involves predicting the future, when in reality, the goal of market timing is to participate in periods of price strength and avoid periods of price weakness.? 

Winning Streaks vs. Losing Streaks

  
  Education
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All traders who last long enough will go through periods of winning and losing streaks.Mathematicians refer to the process as the theory or run known to gamblers as a “streak.”Games of chance  such as roulette ,craps and blackjack are predicated that the house has an edge over the player.Trading  has  a distinct advantage because the trader has the ability to be the house.A mathematical edge is all that is all that is needed by the trader to increase his probability of success.Sound money management advantage begins to work.What happiness in real time trading is that after a series of losing trades the trader will begin to question the system or his ability to execute the system properly.

Tow things are necessary to get though the bad losing times !Belief in your system is very important but it ranks second to the sound money management system.Mediocre trading systems can have positive results with the use of a good money management system.The rule of thumb is to reduce your risk on any trade to 2% of working capital.This should prevent a meltdown but remember trading is about probability not certainty !

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