When it comes to market timing, you’ve got to UNLEARN responses that you’ve spent your whole life learning. Market timing isn’t about you. It is just a strategy that works over time. In other fields, probability plays little if any role. You put in effort, make sure you meet the expectations of the people who pay you, and you’re a success. In the traditional workplace, it makes sense to put a little ego and pride into your work. Your effort and talent often have a direct payoff. But with market timing, the odds can go against you, no matter how much work you put in. The perfect trade can go wrong. That’s hard to accept for most people because it means that being a successful (profitable) market timer or trader, to some extent, is just a matter of the odds randomly working in your favor. But there is good logic behind this randomness. And a successful timing or trading strategy uses this logic to profit. A successful timing strategy will exit losses quickly. It will not stay with a bullish or bearish position to sooth the ego of the strategy’s designer. It will also stay with a successful trade and not exit quickly to lock in a profit. That may feel good for a day, but if the profitable trend lasts two, three, five times longer, you have lost out on a huge profit. Recognizing that odds are part of trading takes some of the glory out of it. But on the other hand, understanding odds helps you cope with inevitable drawdowns.
Archives of “PRIDE” tag
rssThe trading lessons are simple—but not so easy
1. Be with the trade you are in at the moment. Stop trying to control anything but your own trade. The markets are going to do exactly what they want to and when they want to. YOU have the power to control what YOU feel, think, believe and do.
2. All that matters for you is the trade you are in. You may never see that trade again. Savor it, cherish it and be with it for as long as it lasts.
3. Celebrate your victories with yourself. Celebrate the trade and with the trade. The instruction is to refrain from boasting or grandiose behavior when you make a winning trade. The markets will humble you, and pride always comes before a fall. Napoleon said that the most dangerous moments come with victory. Decry and avoid hubris.
Also celebrate your defeats with yourself and the trade because they are mistakes. Mistakes are our greatest teachers because it is through them that we learn. What do we learn? Not to make them again!
Constantly strive to look inward, to know yourself, to raise yourself to the highest level of authenticity. Be rigorously honest about who you are.
Taking personal responsibility for your thoughts, feelings and actions is the first step to true inner peace—both in trading and in life. Never forget the ten most important words you can ever and always ask yourself:
Am I doing the best I can do right now?
The ultimate victory in competition is derived from the inner satisfaction of knowing that you have done your best and that you have gotten the most out of what you had to give…
Ed Seykota-Quotes
(So you didn’t have a clear exit point) In other words, the only way you could stop trading was by losing.
If you can’t take a small loss, sooner or later you will take the mother of all losses.
There are old traders and there are bold traders, but there are very few old, bold traders.
Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.
I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities.
The elements of good trading are: 1. Cutting losses, 2. Cutting losses, and 3. Cutting losses. If you can follow these three rules, you may have a chance.
Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal. (more…)
Discipline
Every day, every trade requires 100% discipline.
Discipline = Emotional Mastery, A Formula Of Confidence/Caution + Humility.
Confident but no caution = Arrogance. Cautious but not Confident = a lack of Conviction, Weakness.
A freedom from pride & Arrogance is Humility. A Weak Trader will never win in the long run.
A Super Trader = A Disciplined Trader. In Discipline, No Weakness Can Exist.
Thoughts on Human Nature and Speculation – Humphrey B. Neil
The chapter entitled, “More Thoughts on Human Nature and Speculation”, includes some classic thinking on aspects of human psychology which prevent us from operating profitably in the markets. A passage from Neil on the dangers of greed follows this line of thought:
“…I have watched traders in brokers’ offices with deep interest, and have tried to learn the traits that crippled their profits. The desire to “make a killing”—greed—has impressed me particularly.
Perhaps this desire to squeeze the last point out of a trade is the most difficult to fight against. It is also the most dangerous. How often has it happened in your own case that you have entered a commitment with a conservatively set goal, which your judgment has told you was reasonable, only to throw over your resolutions when your stock has reached that point, because you thought “there were four more points in the move?”
The irony of it is that seemingly nine times out of ten (I know, for it has happened with me) the stock does not reach your hoped-for objective; then—to add humiliation to lost profits—it goes against you for another number of points; and, like as not, you end up with no profit at all, or a loss.
Maybe it would help you if I told you what I have done to keep me in my traces: I have opened a simple set of books, just as if I were operating with money belonging to someone else. I have set down what would be considered a fair return on speculative capital, and have opened an account for losses as well as for gains, knowing that the real secret of speculative success lies in taking losses quickly when I think my judgment has been wrong.
When a commitment is earning fair profits, and is acting as I had judged it should act, I let my profits run. But, so soon as I think that my opinion has been erroneous, I endeavor to get out quickly and not to allow my greed to force me to hold for those ephemeral, hoped-for points. Nor do I allow my pride to prevent an admission of error. I had rather, by far, accept the fact that I have been wrong than accept large losses…”
This looks like worthwhile study material, so read on and don’t mind the fact that most of the references date back to 1930. Time honored wisdom is the best, and sound practices are applicable in any age.
A Decalogue of Canons for observation in practical life
| 1. Never put off till tomorrow what you can do to-day. 2. Never trouble another for what you can do yourself. 3. Never spend your money before you have it. 4. Never buy what you do not want, because it is cheap; it will be dear to you. 5. Pride costs us more than hunger, thirst and cold. 6. We never repent of having eaten too little. 7. Nothing is troublesome that we do willingly. 8. How much pain have cost us the evils which have never happened. 9. Take things always by their smooth handle. 10. When angry, count ten, before you speak; if very angry, an hundred. |
Wine and Trading
Like a fine wine the surety of a trend reversal gets better with time. The more a trend has aged, the more likely you are to get a valid reversal.
The older a trend gets the more ripe it is for falling off, and the more likely a new more robust trend will take over. A trend that is young and vigorous maybe side tracked briefly, but is not very likely to be defeated. The end of the uptrend says that the last of the big buyers are gone and the end of a down trend says that the last of the big sellers are gone and that trend has now become ripe for a take over.
Think of a trend like a young lion protecting his pride, another lion is not likely to usurp his authority. As he gets older, he is much more likely to lose his pride in defeat to a younger more energetic lion. The same is true with a trend as it gets older it becomes much more likely to be taken over. When considering whether or not to take a reversal (especially in the short term) gauge the age of the trend first. If the trend has just begin then you are not likely to have a legitimate reversal on your hand. If the trend is still very close to the trend line then it is not likely to be a valid reversal.
There are no absolutes in the market, but you do need to keep an eye out for things that put the odds the most in your favor.
How can you tell when a trader is passionate about trading vs. addicted to it?
The first step in dealing with any addictive pattern is identifying it–and identifying it as a problem. Here are a few questions that you might ask yourself:
* Have there been times when I told myself to stop trading, but still found myself placing trades any way?
* Do I find myself overtrading by putting on positions with too large size or by trading during periods when nothing is happening?
* Have my trading losses created problems for me in my relationship(s), or have they caused financial problems for me?
* Have people close to me told me that I need to stop trading?
* Is the pain from losing more extreme than the satisfaction from winning?
* Do I find my moods fluctuating with my P/L?
* Do I trade simply out of boredom sometimes?
* Do I find myself preoccupied with trading outside of market hours at the cost of other work and relationships?
Notice that, for many of these questions, you could substitute the word “drinking” or “gambling” for “trading”. The dynamics of addictions are the same across the board. If you answered yes to three or more of these questions, I would suggest that trading has become a problem for you.
How does one deal with addictive trading? The first step is to identify it, but the second–and harder–step is to acknowledge that you need help for it. It’s pride that tells us we can handle it on our own through will power, but addictions wouldn’t occur in the first place if will power were sufficient to prevent consequences. (more…)
Trading lessons are simple—but not so easy
1. Be with the trade you are in at the moment. Stop trying to control anything but your own trade. The markets are going to do exactly what they want to and when they want to. YOU have the power to control what YOU feel, think, believe and do.
2. All that matters for you is the trade you are in. You may never see that trade again. Savor it, cherish it and be with it for as long as it lasts.
3. Celebrate your victories with yourself. Celebrate the trade and with the trade. The instruction is to refrain from boasting or grandiose behavior when you make a winning trade. The markets will humble you, and pride always comes before a fall. Napoleon said that the most dangerous moments come with victory. Decry and avoid hubris.
Also celebrate your defeats with yourself and the trade because they are mistakes. Mistakes are our greatest teachers because it is through them that we learn. What do we learn? Not to make them again!
Constantly strive to look inward, to know yourself, to raise yourself to the highest level of authenticity. Be rigorously honest about who you are.
Be Unemotional
If you have ever played poker, you will know the high of going “all in”. Your heart is racing like there’s no tomorrow, and you are hoping and praying that the cards will go your way. It’s the thrill of knowing you can double your money in a few moments and also knowing it can all disappear if things don’t go your way.
This type of excitement should not exist in any form in your trading. If you are a thrill seeker, go skydiving. If you are a gambler, go to a casino. If you are afraid to lose money, open a savings account.
Successful Day traders do not let their emotions interfere with their trading. Too often, we let fear, greed, or pride get in the way.
Fear
Fear will prevent you from making the right trades and make you lose out on immense opportunities. Fear stems from lack of knowledge and proper education. You are afraid because you can’t see that a trade is the right trade since you don’t know what the right trade looks like. Once you acquire the knowledge and training, you can begin to trust your decisions because they are based on facts and not emotion.
Greed
Greed is another emotion we must overcome to be successful. Many beginners experience “beginners luck”, and come out on top on their first few trades. Then they start believing that they should have traded with more money so their profits will be larger. So on the next trade, they trade with a large sum of money and they lose it all. Logic will dictate that they should trade with a smaller amount the next time around since they have less capital now. Unfortunately, humans are not logical creatures. Our greed takes over, and we start believing that if we put in more money, we will make up for the lost amount, and come out on top. Sadly, this cycle can only continue until you are completely out of money. The worst thing that can happen to a beginner trader is to have a successful first trade. (more…)