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9 Steps for Traders

  
  Education
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1- When you see a trade setup you like, pull the trigger without hesitation

It looks so simple but it isn’t! If your mind is not 100% ready to take the trades when they present themselves to you, you’ll miss them, you’ll be just watching and will let them go without any apparent reason why, and then when you realize what you just did, your reaction is to get angry! Just to make you jump into an unplanned trade and lose… Prepare in advance, market is like playing chess, you have to look ahead for the next move.

2 – Always use STOPs

In case you don’t like to use physical stops, make sure you’ll be able to stop in case it breaks the limits you’ve set for that trade

 

3 – Anything can happen

Try to start the morning with a free state of mind so that you’ll be able “to listen” to the market.

4 – Always lower your trade size when you’re losing

If you make two losing trades in a row, lower trade size until you get in tune with the market again.

5 – Never turn a winning trade into a loser

That’s the reason why I like to take small portions of profit when market makes it available to me, I hate to see a winner turn into a loser, manage your trades well.

6 – Buy or develop a system and stick to it, don’t change it from day to day

Find a trading system that fits your personality and once you have it, if it gives you an edge, stick to it, don’t change it because it didn’t work on one or two days, otherwise you’ll keep changing systems forever and that means: losing money.

7 – Get out of losers

One of the most known market adages is: “Cut your losses and let your profits run.” Much easier said than done, but it’s very important that you do it, usually it’s much easier to do exactly the opposite… make sure you bear that in mind.

8 – Don’t worry about news

This one I like very much, the only thing news will do is to accelerate the targets, nothing else, most of the time, I completely trash the news and just follow what I see on my map.

9 – Monitor your progress, create your own trading journal

It is very important that you have a trading journal to track your success, so that you’ll be able to stop what you’re doing wrong and keep your strong strategies. I’ll talk about this in detail on my next post.

Hope this helps, happy trading!

Technically Yours

ASR TEAM


Monitor yourself

  
  Education
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I define a mistake as not following your rules. Thus, for many people who have no written rules, everything they do is a mistake. But if you have followed the first four steps, then you will have rules to guide your trading and you can define a mistake as not following those rules. And, of course, when you repeat the same mistake over and over again, then that is self sabotage. However, by monitoring your mistakes and continuing to work on yourself, you can minimize the impact of such mistakes. People who do this, in my opinion, will tend to produce consistent, above average profits

You Are Having Trading Skill or You are Lucky ?

  
  Education
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Traders with skill have large gains after 100 trades and are relatively quiet, traders that were lucky have huge gains after a few trades and are very loud, then very quiet for the next few trades that usually bring their account to zero.

Traders with skill risk 1% to 2% of their trading capital per trade and win in the long term, traders that are just lucky risk the majority of their account for a few big wins in the short term but lose in the long term when their luck runs out.

Traders with skill use a successful method with many stocks in different markets, traders with just luck are only successful with one stock and when its up trend ends their winning streak ends.

Traders with skill have winning track records over many years, traders with only luck only have winning track records measured in months.

Traders with skill have risk management as a top priority, traders with only luck do not understand why risk management is important, yet.

Traders with skill are trading like it is a business, traders operating with luck are trading like they are a gambler in a casino.

Traders with skill use a trading plan and back tested method, traders with luck make guesses and are sometimes right.

Traders with skill have done their homework, traders with luck think they are naturally smarter than the market.

Traders with skill are disciplined and stick to their system, traders with luck make bets based on opinions.

Would you rather be lucky for a few trades or skillful for a few years? Lucky traders give back their profits when their luck runs out. Skillful traders are eventually financially interdependent due to their long term capital growth.

What makes a trader consistently profitable?

  
Analysis, Education
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There are three things:
 
1) Having an edge, which is some methodology for determining with reasonable accuracy the relative probability of the market price hitting your profit target before it hits your stop loss price.  An edge is provided by a set of trading strategies, and a set of rules for when to use which trading strategies (briefly, when to follow a trend, when to fade a trend, and when to stay out.)
 
2) The discipline and emotional fortitude to follow the rules of your trading rules flawlessly.
 
3) Sound risk and money management rules.  
 
Sound money management and risk control are the keys to being a profitable trader. It is not the prediction or the latest and greatest indicator that makes the profit in trading, it is how you apply sound trading discipline with superior cash management and risk control that makes the difference between success and failure.  (more…)

Words of Wisdom

  
  Education
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These generally brief phrases often include such pearls of wisdom as:

“Buy low, sell high.”

This maxim describes profitable trading in a nutshell and represents what every successful trader aspires to do. Of course, this is much easier said than done.

“Let your profits run, but cut your losses short. “

Allowing a winning position to continue making profits while taking losses quickly can make up a solid trading strategy in itself, and it is a key element of just about any good money management plan.

Many successful traders apply this as a trading rule in their trading plans in one form or another, perhaps by having a minimum risk reward ratio where the anticipated reward on a trade is always greater than the risk taken.

“Sit on your hands when you don’t have a clue.”

Knowing when you do not know where the market is going and discerning when to stay out of the market because of difficult trading conditions or because of your individual portfolio situation can save a trader considerable money and frustration.

Remember, good trading opportunities eventually arise for those who wait for them patiently.

“No one ever went broke taking a profit.”

This seems a wise and yet somewhat limiting expression perhaps. Famous trader Jesse Livermore used to say this and then finish with “but no one ever got rich taking three or four points out of bull market”. Taking profits will always add to your account, but by “letting profits run”, a substantially higher profit can often be had.

“It’s never too low to sell or too high to buy.”

Typically, markets will continue moving in the direction of the general trend. When a high or low is made, often a sufficient amount of momentum will propel the price to an ever higher high or lower low.

“Price discounts all.”

The mantra of technical analysts, the saying refers to the belief that news about any event related to the trading instrument – whether it is related to current events or supply and demand – will already be included in the price of a currency.

“All news is old news.”

A variation on “Price discounts all”, this saying refers to the idea that the market has already moved to factor information into the currency pair’s exchange rate regardless of what the news that came out was.

“Buy the rumor, sell the fact.”

Buying the rumor means going long before a bullish news item ever makes it to the news wires for fundamental analysts to mull over. Trading activity then ensues based on this rumor indicating that an item of importance will soon be released. The trader wise to the rumor can take advantage of the release of this news by selling out their position once it becomes public.

“Plan your trade and trade your plan.”

Trading does not favor the scatterbrained over the long term, so having a comprehensive and objective trading plan which can be easily followed and implemented makes up a key component of any successful trader’s methods.

“The trend is your friend.”

Keeping abreast of the major trend in the market and following it by positioning according to its overall direction will tend to give a trader an edge.

“Markets go up the stairs and down the elevator.”

This saying refers to the slow and plodding nature with which markets often go up, whereas when prices decline, they tend to do it in a much faster and abrupt way. While less of a factor in the forex market, this is especially true of stock markets.

Basically, all of the above sayings contain valuable advice and trading wisdom that can be useful for just about anyone involved or thinking about getting involved in trading forex or any other market.

The harder I try, the more money I lose. What’s going on?

  
  Education
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A:  This is a fairly common phenomenon which is why we have to learn how to adapt to market conditions and be patient with our strategies. Just because you “try harder” doesn’t mean that your profits will expand equally in relation to your effort. While effort helps create and sustain an edge, at the end of the day you still need the market to cooperate with whatever you are doing.

The best analogy I can provide here is one that many golfers are familiar with. If you’ve ever golfed in high winds, you know that your score will often be higher. Some of this, obviously is due directly to the windy conditions (which you have no control over). However, studies show that the most significant reason why golfers perform poorly in windy conditions has less to do with the conditions but more about how they react to those conditions. For example, many golfers will tend to swing harder in high winds which causes them to lose both their swing tempo and balance and they make more mental mistakes because the wind distracts them. The same is true for traders whose strategies are not flowing with the market. Without realizing it, traders will modify their own approaches (often by trying harder by making trades that don’t fit their strategy) which tends to hurt performance more than it helps.

Bottom line – keep close tabs on yourself and how you’re “adjusting” to market conditions. Being aware of how the market environment is affecting you and your changes to it is an important skill every trader must possess.

PSYCHOLOGY & RISK for New Traders

  
  Education
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The issues faced by the New Trader are greed, stress, impatience, fear, and lack of desire to learn.

“When a new trader enters the stock market with money but no experience, the odds are he will quickly gain experience by losing money.”

RISK

The New Trader must make managing money a priority, run trading like a business, control trading size, admit when he is wrong, and lock in strategy driven profits.

“When you go to your computer to trade, you should approach it as if you are entering an auction, not a casino.” 

Gerald Loeb’s Market Wisdom

  
  Education
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READ THIS NOW1. The most important single factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages. (more…)

Be Unemotional

  
  Education
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UnemotionalIf 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…)

50 Trading Mistakes

  
  Education
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1. Many futures traders trade without a plan. They do not define specific risk and profit objectives before trading. Even if they establish a plan, they “second guess” it and don’t stick to it, particularly if the trade is a loss. Consequently, they overtrade and use their equity to the limit (are undercapitalized), which puts them in a squeeze and forces them to liquidate positions.

Usually, they liquidate the good trades and keep the bad ones.

2. Many traders don’t realize the news they hear and read has already been discounted by the market.

3. After several profitable trades, many speculators become wild and aggressive. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that “can’t fail.”

4. Traders often try to carry too big a position with too little capital, and trade too frequently for the size of the account.

5. Some traders try to “beat the market” by day trading, nervous scalping, and getting greedy.

6. They fail to pre-define risk, add to a losing position, and fail to use stops.

7 .They frequently have a directional bias; for example, always wanting to be long.

8. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake, or they look at the market on too short a time frame.

9. They overtrade.

10. Many traders can’t (or don’t) take the small losses. They often stick with a loser until it really hurts, then take the loss. This is an undisciplined approach…a trader needs to develop and stick with a system. (more…)

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