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"Truth and Trading"

  
  Education
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1. Truth: Truth is an absolute value. Some things are true in all places and times. Resisting evil, for example, is always right.

2. Justice: Justice consists of treating others as one would wish to be treated. “Do unto others as you would have them do unto you” summarizes this concept of justice.

3. Courage: Courage means standing up for justice.

4. Moderation: Nothing should be carried to excess.

5. Wisdom: Wisdom enables a person to know what justice is, to recognize when courage is required, and to do what is right.

So how do these values play out in our trading? In this column, let’s explore truth as it applies to your trading.

One of the clear, clean things about trading is that truth is immediately and finally manifested. The price goes up or down or nowhere. Your trade or position is profitable or not. You can’t spin it any other way. You’re right when you make money. You’re wrong when you lose money. That’s just the way it is.s

There are also other truths involved. You just got lucky. You have a robust and proven method for trading that you can rely upon over time. Your methods are flimsy at best, unpredictable at worst. You have no method or you have a million methods which amounts to the same thing. Your impulses frequently and easily override your methods, or you rigidly apply your rules even when you clearly should not.

You keep clear records so you can assess what works best, or you don’t and at the end of the day (or the week or the month), you have no idea. Your record of action is either clear or murky. To correct it, it needs to be clear.

You need to tell yourself the truth as you go along. No excuses. No complaints. No trumped up stories. If you can truthfully analyze your trading mistakes as well as your trading strengths, you can make adjustments, and develop a personal style that will lead to trading success.

Telling the truth about each day’s (week’s, month’s) trading doesn’t mean you have to be brutally cruel to yourself or gloomy about your trading. What it does mean is that you don’t have to do that again, and you can optimistically look forward to the next day’s trading. You will know the truth, and the truth will make you free.

You want to keep your trading in true alignment with any known or possible clues as to the on the ground truths in relevant areas. There are fundamental truths, technical truths, methodological truths, inter-relational truths, and personal truths. The closer you can get in any or all of these areas, the better your prospects. You will seek to know the truth, and those truths will power your trading.

Universal Principles of Successful Trading Review

  
  Education
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This book is excellent for traders that are ready for it. You need a foundation in trading to understand its importance and take the principles seriously. Once you are through the rainbow and butterfly phase of trading and realize that you will not be a millionaire in a year, this book will help you get focused and get serious about your trading and what really works.
Here are the six universal principles of successful traders:

1). Preparation

Author Brent Penfold is in the minority believing risk management is the #1 priority in trading. Brent believes that once you get your trading system and position size in place you must use the amount you will risk on each trade to determine your risk of ruin. The book shows exactly how to figure this out using Excel. His point is that if your risk of ruin is not zero then you will eventually blow out your account. Risking 1% to 2% of your capital in any one trade usually gives you a zero percent risk of ruin but it also depends on your systems win/loss ratio. But the point is to test any system with 30 trades first then determine your risk of ruin.

2). Enlightenment

Your most important goal is to lower your risk ruin to zero. In trading, the trader with the best ability to cut losses short wins. Simple trading strategies work the best based on traditional support and resistance while trading with the trend on either retracements of break outs. The 10% of winners in the market win by treading where others fear, buying on break outs when they first occur and going short when a new low is made, or buying into the abyss when a security finds support or resistance and reverses at the end of a monster trend.

3). Developing a trading style

You must choose your own personal style of trading, swing trading or trend trading. You must also trade based on your chosen time frame: intraday, short term, medium term, or long term.

4). Selecting Markets

Ideal markets to trade have volume and price transparency, liquidity, 24 hour coverage, zero counter party risk, low transaction costs, and are honest and efficient. They also must  have the necessary trading attributes of volatility, research, simplicity, ease of short selling, specialization, opportunities, growth, and leverage. These are the markets that afford you the greatest chances of money trading. (more…)

The Universal Principles of Successful Trading

  
  Education
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A book review for Brent Penfold’s book ‘ The Universal Principles of Successful Trading: Essential Knowledge for All Traders in All Markets”

This book is excellent for traders that are ready for it. You need a foundation in trading to understand its importance and take the principles seriously. Once you are through the rainbow and butterfly phase of trading and realize that you will not be a millionaire in a year, this book will help you get focused and get serious about your trading and what really works.
Here are the six universal principles of successful traders:

1). Preparation

Author Brent Penfold is in the minority believing risk management is the #1 priority in trading. Brent believes that once you get your trading system and position size in place you must use the amount you will risk on each trade to determine your risk of ruin. The book shows exactly how to figure this out using Excel. His point is that if your risk of ruin is not zero then you will eventually blow out your account. Risking 1% to 2% of your capital in any one trade usually gives you a zero percent risk of ruin but it also depends on your systems win/loss ratio. But the point is to test any system with 30 trades first then determine your risk of ruin.

2). Enlightenment

Your most important goal is to lower your risk ruin to zero. In trading, the trader with the best ability to cut losses short wins. Simple trading strategies work the best based on traditional support and resistance while trading with the trend on either retracements of break outs. The 10% of winners in the market win by treading where others fear, buying on break outs when they first occur and going short when a new low is made, or buying into the abyss when a security finds support or resistance and reverses at the end of a monster trend. (more…)

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