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Trading Recipe!

RecipeforsucessThe recipe for success in trading are as follows:

  • *Identify a signal
  • *Take immediate action
  • *Feel good no matter what the result, as long as the trade is consistent with your technical bias based on sound probabilities

On the other hand, experiencing hesitation or self-doubt, just at the moment of action, is the recipe for failure!

Advantages of Technical Analysis

  • Technical analysis is a bit of a misnomer since it is really not that technical. A better name for the use of charts to make investment decisions might be risk/reward analysis or even market psychology. Sure, there are some complex mathematical concepts involved with some of its more esoteric indicators. But at its core, technical analysis is simply a method of determining if a stock or the market as a whole is worth buying or selling. Once we identify this we are way ahead of the game with regard to assembling a winning portfolio.
  • Simply stated, technical analysis is the study of data generated from the market and from the actions of people in the market. Such data includes price levels that have served as turning points in the past, the amounts of stock being bought and sold each day (volume), and the rate of change of price movements (momentum) over a given span of time. (more…)

Positive Affirmations

affirmationsRepeat the words yourself to ingrain them in your brain.
Repeat the words yourself to ingrain them in your brain.

  • I am a consistent trader.
  • I have complete confidence in my abilities.
  • – I follow my trading plan.
  • I know the markets today are capable of doing anything.
  • I am prepared to trade what I see.
  • I will have winning and losing trades today.
  • I set stops immediately after I enter a trade.
  • I will never add to a losing position.
  • I have complete confidence in my abilities.
  • I have supreme concentration.
  • I will immerse myself into the market flow.
  • I will take what the market offers up to me.
  • I know what my trading edge looks like.
  • I will not hesitate when my system gives me a signal.
  • I have complete trust in probabilities.
  • I will buy when my system signals me to buy.
  • I will sell when my system tells me to sell.
  • I will trade responsible size, never risking too much.
  • I am moving closer to my goals everyday.
  • I am a skillful trader but always striving to do better.
  • I learn from my mistakes so I do not repeat them.
  • I have complete confidence in my abilities.
  • I am an excellent trader.

Trading Wisdom

This (Trading) is not a job where you get paid by the hour. You get paid for doing the right thing”

-“Forget that your money is at stake. Money in trading account is just a tool for making money. Preserve your tool. You need it to make money”

-“Don’t let the outcome of one trade alter your trading discipline. One trade doesn’t make a system…”

-“Trading is a game of probabilities. You don’t have to be right every time. You just have to follow your rules”

-“You decide your fate; the market doesn’t”

-“Pure followers of stock pickers will never be around…Learn or you are bankrupt”

-“Be aggressive in trending market and conservative in choppy market”

“Take home runs when you can, but don’t beat yourself up about missing a few. One trade should never make or break your account”

LESSONS FROM TRADING IN THE ZONE BY MARK DOUGLAS

1.) When it comes to trading, it turns out that the skills we learn to earn high marks in school, advance our careers and create relationships with other people, turn out to be inappropriate for trading.  Traders must learn to think in terms of probabilities and surrender all of the skills acquired to achieve in virtually every other aspect of life.

2.) Within 9 months of moving to Chicago, I had lost nearly everything I owned.  My losses were the result of both my trading activities and my exorbitant lifestyle, which demanded that I make a lot of money as a trader.

3.) You don’t need to know what’s going to happen next to make money.  Anything can happen.  Every moment is unique, meaning every edge and outcome is truly a unique experience.  The trade either works or it doesn’t.

4.) More or better market analysis is not the solution to his trading difficulties or lack of consistent results.  It is attitude and “state of mind” that determine his results.  A winner’s mindset means learning how to think in probabilities.

5.) The edge means there’s a higher probability of one outcome than another.  The greater your confidence, the easier it will be to execute your trades.

6.) Do you ever feel compelled to make a trade because you are afraid that you might miss out?

7.) People , expressing their beliefs and expectations about the future, make prices move- not models.  The fact that a model makes a logical and reasonable projection based on all the relevant variables is not of much value if the traders who are responsible for most of the trading volume aren’t aware of the model or don’t believe in it.  In other words, people who trade don’t always act in a rational manner.

8.) Price movement could be so volatile that it would be very difficult, if not impossible, to stay in a trade in order to realize the fundamental analysts’ objective. (more…)

FEAR

Fear is the main source of superstition, and oneof the main sources of cruelty. To conquer fear is the beginning of wisdom… Bertrand Russell

Fear is a misunderstood emotion, and one that gets a pretty bad rap these days. We owe our survival as a species to the hard-wired fear that protected and kept us safe from physical threats for hundreds of thousands of years.  But what about the litany of fears that plagues traders every day? Fear of losing, of watching profits disappear, making mistakes, missing out, taking profits too soon…the list goes on.

Perhaps the larger question is this: If there is so much fear and almost every trader feels fear, why do millions of people continue to trade?  The answer lies in the way that fear is perceived. 

For many, fear is a predator that is constantly lurking, sneaking up on them and ready to attack at any moment.  In this brain set, they are always running away from fear, crouching in a corner or looking for a safe place to hide. Fear blinds them to opportunity in much the same way that greed blinds them to danger.

 Fear is that little darkroom where negatives are developed… Ferdinand Pritchard (more…)

Trading Nuggets

…to be right or wrong in a trade is NOT a decision. It is what happens. To STAY right or wrong IS a decision..we all trade what we believe happens next. Since NOBODY knows what happens next, we learn to think purely in probabilities. Does not matter what happens next. It is what you DO when you find out what happens next that separates winning traders from losing traders.

—it is a marathon, not a sprint. Your job ONE as a trader is to protect trading equity. Most traders look at what they can make in a trade. NOT what they could lose.

—Trade markets on YOUR terms…as the saying goes…much rather be in cash wishing I was in the market than being in the market wishing I was in cash.

Focus On Playing To Win – Want To Know Why?

The focus on avoiding losing is an easy condition to slip into.  I found it especially so if you’ve had some tough periods in your life.  Perhaps you lost a business, blew up a trading account or went for that promotion and failed to get it.  

It is particularly easy when you are taking down data to analyse your performance as most effective performers do.  That data is right in front of you.  Clear as day.  You can see exactly how many losing trades you have had, how many losing days, weeks etc.

You have an understanding that it’s all about probabilities and that if you follow the old saying “limit your losses and let your winners run” you can be a successful trader with a seemingly bad win rate (30-40%).  As long as your winners outshine your string of small losers you will be OK.   (more…)

Self-Control and Discipline

Cultivating discipline and self-control is vital for consistent and profitable trading. You implement proven trading strategies, over and over, so that across a series of trades, the strategies work enough to produce an overall profit. It’s like making shot after shot on the basketball court so as to accumulate a winning number of points. The more shots you take, the more likely you will amass points. But the winning player is the person who first develops the skill to make the shot consistently, so that at every possible opportunity, the ball is likely to go through the basket. To a great extent, consistency is the key. If the player uses one approach one time and a different approach at another time, performance is haphazard. 
It’s the same for trading. One must trade consistently, following a specific trading plan on each and every single trade. This allows the law of averages to work in your favor, so that across the series of trades, you will make an overall profit. If you follow the plan sometimes and abandon it at other times, you throw off the probabilities. Suppose you used a strategy that had a track record of 80%. Under the best-case scenario, you could only expect to win 80% of the time. But since history doesn’t always repeat itself, it’s likely that you will win less than 80% of the time. If you don’t execute the trading strategy the same way each time, you will decrease your winning odds. And fewer winning trades may mean an overall loss. That’s why discipline and self-control are so important.  (more…)