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Look at trading like a pie chart

  
  Education
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  • Risk Management:  Stop loss, profit target, Risk / Reward, and position sizing.
  • Trading Game Plan:  expectations for the next session, Levels of Interest, and intraday tape reading.
  • Psychological Health:  Staying positive and keeping your head.
Notice the three green segments in the middle of the circle (that, as I was told today by a friend of mine, looks like the Google Chrome icon).  These three segments are isolated to remind you how crucial it is to have ALL of those pieces full of their green color while you’re trading – if one of them is missing, the other two will have to compensate for its absence.  If we took the above example, we would notice that the psychological health was damaged right away, as the trader immediately went into denial about the initial failure of his position.  The trader then got pissed off, and risked more money in order to compensate for his initial loss, damaging both his trading game plan and his risk management.  The center circle is now empty for this particular trader, and he has become a loose cannon.

8 MISTAKES GREAT TRADERS NEVER MAKE

  
  Education
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  1. Try to close a position but accidentally DOUBLE it instead.
  2. Put a swing trade on and realize AFTER the close that earnings are coming soon. Like the next morning.  Before the market opens.
  3. Buy the CALLS in a stock that is breaking out at what they think is a bargain price, only to find out later that they actually bought the PUTS.
  4. Constantly drive by their ex girlfriend’s house to see if she is dating that idiot biker guy with the tats who will never love her the way they would….
  5. Knock off early for the day to go rollerblading, sure that they put a hard stop in on their position before they left (but didn’t).
  6. Continuously hit the “submit” button on their trading platform when their order “hangs up” only to find out that they bought their position eight times.
  7. Listen to the whole “Best of WHAM” album online, unaware that Spotify is auto-posting that info to their Facebook timeline.
  8. Think they have a “one cancels other” limit and stop in place and take a long lunch after their position hits it’s profit target.  Then come back later in the day only to learn that price reversed, hit their stop (making them net short), and then rallied.

20 Habits of Great Traders

  
  Education
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1)      Patient with winners and impatient with losers

2)      Making money is more important than being right

3)      View Tech Analysis as a picture of where traders are lining up to buy and sell

4)      Before they enter every trade they will know profit target or stop exit

5)      Approach trade no.5 with the same conviction as the previous 4 losing trades

6)      Use naked charts

a)      As we mature we begin peeling off indicators

b)      Prices action is key (more…)

Anticipation ,Action & Reinforcement

  
  Education
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The ANTICIPATION Phase:  this is where all the left hand chart reading takes place in preparation for the right hand chart battle. It’s the PROCESS that precedes the ACTION to put on a trade. A technical trader anticipates that a past price pattern will repeat again, so he identifies the pattern, locates a current one and determines a suitable match is present.  Technical analysis is nothing more than finding previous price patterns matched with current market conditions.  Traders anticipate such repetitive behavior based on human nature and seek to take advantage of it.

The ACTION phase involves hitting the BUY key based on the previous ANTICIPATION process.  Since no one can tell the future or what the right hand side of the chart will reveal, the ACTION is based on the confidence that the trader will do what is right once a trade is put on, which is to exit gracefully at a pre-determined loss line or exit humbly at a pre-determined profit target (P2), fully accepting either/or, or an OUTCOME between one or the other, depending on current market conditions.

The REINFORCEMENT phase occurs after the trade is closed.  Whether or not the trade is a win, lose, or draw, the self-talk immediately following trade closure is vitally important for the next trade, and even the next series of trades, as future trades can be negatively or positively affected by building pathways to future success.  These pathways are neurologically based and can make or break a successful trading career.  While it is important to ANTICIPATE right side chart OUTCOMES, what is more important is DEVELOPING right side brain reinforcement.

Simple Rule for Traders

  
  Education
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Would you like to get someone to hand you all their money?

No, you don’t need a gun.

You don’t need to blackmail or kidnap anyone.

I swear that what I’m about to show you is NOT Illegal!

I guarantee that this article will change everything you have heard, seen or tried in stock market trading.

This is the best lesson you will ever learn in stock market trading.

Trading is part rational and part emotional. People often act on an impulse even if they know they have harmed themselves time and time again in the process of so doing. A winning trader becomes too confident about his positions and misses sell signals. A fearful trader beaten up by the market becomes too fearful and sells too early. When he sees the stock immediately rise again, overshooting his original profit target, he can no longer stand the pain of missing the rally and buys way above his original entry point. The stock stalls and slides and he watches in horror as it sinks like a rock. In the end, he can’t take any more pain and sells out for a loss—right near the bottom. The original plan to buy may have been rational, but actually executing on his plan created an emotional storm.

Emotional traders do not pursue their best long-term interests. They are too busy bragging about a winning position and how smart they were for buying a stock or complaining and coming up with conspiracy theories about a losing position.

Your goal is to take money from emotional amateur traders. (more…)

Trade what you Observe – Not what you Believe

  
  Education
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One of the hardest lessons to learn in your quest to become a true trader is to susobservationpend your beliefs and to trade that which you have learned through hours of observation.

How many times have you stated that company x is overvalued only to watch it go higher? Or undervalued only to watch it continue lower? How many times have you thought that the “market” can’t go any higher and yet it did day after day? Or lower? How many times have you been scratching your head because the “market” is rising on such low volume? When is the last time you were in disbelief because company y has closed higher for 10 days in a row (after shorting it on the third day)? And have you ever acted on a recommendation from Jim Cramer only to watch in disbelief because as soon as you entered it reversed course?

Bottom line – trading what “you” believe is a recipe for disaster.

Eventually most folks figure out that the market is so chaotic that they are lost and admit they don’t know how to trade. Many quit in disgust. A few of you press on and begin a journey of real study. (more…)

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