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Look Inside Yourself

  
  Education
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One trader wrote in that he was in a slump and wondered if he should switch markets or find another indicator.

Do you ever find that you also want to blame something outside yourself?

One of my favorites used to be blaming ‘the system’ – the system is rigged against me: the brokers are the only ones getting rich, robbing me on these bid/asked spreads, hunting all my stops, etc.

When you blame an external situation, you are giving up control, and instead letting yourself be controlled by outside events. This converts you from a proactive trader into a reactive trader. Or a winner into a whiner.

If you are reacting after the fact in the markets, you are then letting your emotions start to control you, instead of planning how you will react to any set of circumstances.

You know how letting emotions control you turns out in the markets. You go broke.

You must believe that you control your own destiny. If you are not getting the results you expect of yourself, look inside yourself.

Start analyzing your actions and behavior. Are you hanging on to losses too long? Are you cutting profits too soon? Are you having trouble pulling the trigger only to watch in frustration as your trade wins without you?

These and other frustrations should clue you in that you need to fix some element of your trading plan. Evaluate your present situation, and if it needs to change, take decisive action and change it.

Dhirubhai Ambani's W-I-L-L

  
Education, Humour
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mu-cash-anil
quotes
“I am deaf to the word “no”.”
“Think big, think fast, think ahead. Ideas are no one’s monopoly”
“You do not require an invitation to make profits.”
“If you work with determination and with perfection, success will follow.”
“Pursue your goals even in the face of difficulties, and convert adversities into opportunities.”
“We bet on people.”
“Meeting the deadlines is not good enough, beating the deadlines is my expectation.”
“Don’t give up, courage is my conviction.”
“We cannot change our Rulers, but we can change the way they Rule Us.”
My Hot Favourite quotes are :Number 1 ,6 and last.
Just comment if possible.
Updated at 28th August/Baroda

Good Traders & Bad Traders

  
  Education
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Good Traders

  1. The good traders that I have met are generous with their time and knowledge.
  2. Good traders are flexible in their trades and opinions they follow where the market takes them.
  3. The majority of good traders have simple charts that focus on price action. They focus on the simplicity of what works.
  4. A good trader will admit a loss and share what happened.
  5. Good traders are first and foremost traders, any service or product they offer is secondary.
  6. Good traders are humble and respect the market and the reality of trading.
  7. Good traders at times will call real trades and post entries and exits.
  8. Good traders are on social media not for show but for teaching and friendships and having fun.
  9. Good traders go with the current market trend.
  10. Those who make a comfortable living trading are playful, joking and happy .

 Bad Traders

  1. Many bad traders try to tear down others to make themselves feel superior. Good traders have no need to do this they have highly self esteems already. (more…)

7 Trading Rules of Jesse Livermore’s

  
  Education
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Lesson Number One: Cut your losses quickly.

As soon as a trade is contemplated, a trader must know at what point in time he’ll be proven wrong and exit a position. If a trader doesn’t know his exit before he takes the entry, he might as well go to the racetrack or casino where at least the odds can be quantified.

Lesson Number Two: Confirm your judgment before going all in.

Livermore was famous for throwing out a small position and waiting for his thesis to be confirmed. Once the stock was traveling in the direction he desired, Livermore would pile on rapidly to maximize the returns.

There are several ways to buy more in a winning position — pyramiding up, buying in thirds at predetermined prices, being 100% in no more than 5% above the initial entry — but the take home is to buy in the direction of your winning trade –  never when it goes against you.

Lesson Number Three: Watch leading stocks for the best action.

Livermore knew that trending issues were where the big money would be made, and to fight this reality was a loser’s game. (more…)

Day Trading Methodology

  
  Education
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I have been reading the latest book from Van Tharp, Super Trader and I want to highlight this passage about daytrading methodologies:

“For example, if you are a daytrader, open up a position and either take a small loss or get out at the end of the day. When you do that, you are not tied to the market all day, and you may find that you take small losses and get huge profits. Simplify your entry technique and concentrate on exits”

Now, lets cross this with Jesse Livermore remarks on the speculative line of least resistance:

“It sounds very easy to say that all you have to do is to watch the tape, establish your resistance points and be ready to trade along the line of least resistance as soon as you have determined it.”

So, we have a powerful daytrading methodology in these two market generalizations. But JL added, “But in actual practice a man has to guard against many things, and most of all against himself – that is, against human nature.”

Rings a bell? Maybe we should all print this post and have it by the trading desk.

Trading wisdom and strategies

  
  Education
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Trading System – According to Howard Abell: The trading system gives the trader the ability to control his or her emotional states rather than allowing them to control him. A system is a disciplined method for organizing dynamic, ever-changing market phenomena.

Risk Control – According to Paul Tudor Jones: If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

Psychological Makeup – According to Leo Melamed: You learn to distinguish the good traders from the bad, the successful techniques from the unsuccessful, and the good habits from the faulty. You also learn to distinguish the lover from the fighter, the winners from the losers, the serious from the frivolous, the cerebral from the superficial, and the friend from the foe. But above all, you learn that the psychological makeup of the trader is the single most critical element of success.

The Easy Middle – According to Randy McKay: The beginning of a price move is usually hard to trade because you are not sure whether you are right about the direction of the trend. The end is hard because people start taking profits and the market gets very choppy. The middle of the move is what I call the easy part.

Cut Back Trading Size When Losing – According to Bill Lipschutz: When you are in a losing streak, your ability to properly assimilate and analyze information starts to become distorted because of the impairment of the confidence factor, which is a by-product of a losing streak. You have to work very hard to restore that confidence, and cutting back trading helps achieve that goal.

Have A Predetermined Stop – According to Bruce Kovner: Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I am getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis.

Accept the Risk – According to Mark Douglas: To whatever degree you haven’t accepted the risk, is the same degree to which you will avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.

Making Mistakes Is Part of Business – According to Bruce Kovner: Michael Marcus [another top trader] taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgement, being wrong, making your next best judgement, being wrong, making your third best judgement, and then doubling your money.

Characteristics of Perfect Trader

  
  Education
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-Sense of calmness
-Ability to focus on the present reality
-Not caring which way the market breaks or moves
-Always aligning trades in the direction of the market, flowing with the market
-Not caring about the money
-Always looking to improve your skills
-Profits now accumulating and flowing in as your skills improve
-Keeping an open mind, keeping opinions to a minimum
-Accepting the risk in trading
-No Anger
-Learning from every trade
-Winning and losing trades accepted equally from an emotional standpoint
-Enjoying the process
-Trading your chosen approach or system and not being influenced by the market or
others
-Not feeling a need to conquer or control the “market”
-Feeling confident and feeling in control of “yourself”
-A sense of not forcing the markets or yourself
-Trading with money you can afford to risk
-No feeling of ever being victimized by the markets
-Taking full responsibility for your trading

When you can read the list above and genuinely say that’s me, you have arrived!

The emotions of trading

  
  Education
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When trading there are two emotions that are more common, and more dangerous, than all the rest; fear and greed.

Fear and greed can ruin even the best trading strategies

One moment of fear or greed can lead to a moment of madness and months of hard won profits going down the drain

Uncontrolled emotions should not be an excuse for losses and losses should not be an excuse for uncontrolled emotions

Remember!! Trading affects psychology as much as psychology affects trading
 

Greed

“You can’t feed on greed”

  • Many people think that greed is thinking that the sole aim of trading is to make money.
  • This is NOT what greed is

Greed is trying to make money too quickly
There are lots of ways to be greedy in trading;

  • Trading in sizes that are too large
  • Trading too frequently
  • Having unrealistic expectations
  • Dreaming of the big hit trade, rather than steadily building your equity

Fear

Fear in trading has two faces;

  • Fear of loss
  • Fear of missing out

The fear of loss compels traders to close profitable trades prematurely, meaning they miss out on potential profit
The fear of missing out compels traders to abandon their trading strategy so they do not miss a major price move
Fear is NOT good as it leads to overtrading and miss-timed entry and exit points
So
DON’T BE SCARED!!

Risk Management For Traders

  
  Education
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One of Sun Tzu’s most famous quotes is: “Every battle is won before it is fought.” The phrase implies that it is planning and strategy that wins wars and not the battles themselves. Similarly, successful traders commonly quote the phrase: “Plan the trade and trade the plan.” Just like in war, planning ahead can often mean the difference between success and failure.

Stop-loss (S/L) and take-profit (T/P) points represent two key ways in which traders can plan ahead when trading. Successful traders know what price they are willing to pay and at what price they are willing to sell, and they measure the resulting returns against the probability of the stock hitting their goals. If the adjusted return is high enough, then they execute the trade.

Conversely, unsuccessful traders often enter a trade without having any idea of at what points they will sell at a profit or a loss. Like gamblers on a lucky or unlucky streak, emotions begin to take over and dictate their trades. Losses often provoke people to hold on and hope to make their money back, while profits often entice traders to imprudently hold on for even more gains.

 Take-Profit Points, trading greed, trading fear, trading emotions, financial behavior 


A stop-loss point is the price at which a trader will sell a stock and take a loss on the trade. Often times, this happens when a trade does not pan out the way a trader hoped. The points are designed to prevent the “it will come back” mentality and limit losses before they escalate. For example, if a stock breaks below a key support level, traders often sell as soon as possible.

On the other side of the table, a take-profit point is the price at which a trader will sell a stock and take a profit on the trade. Often times, this is when there is limited additional upside given the risks. For example, if a stock is approaching a key resistance level after a large move upwards, traders may want to sell before a period of consolidation takes place. (more…)

Trading Lessons

  
  Education
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  • Don’t sacrifice your position for fluctuations.
  • Don’t expect the market to end in a blaze of glory. Look out for warnings.
  • Don’t expect the tape to be a lecturer. It’s enough to see that something is wrong.
  • Never try to sell at the top. It isn’t wise. Sell after a reaction if there is no rally.
  • Don’t imagine that a market that has once sold at 150 must be cheap at 130.
  • Don’t buck the market trend.
  • Don’t look for the breaks. Look out for warnings.
  • Don’t try to make an average from a losing game.
  • Never keep goods that show a loss, and sell those that show a profit. Get out with the least loss, and sit tight for greater profits.

  • Fear: fearful of profit and one acts too soon.
  • Hope: hope for a change in the forces against one.
  • Lack of confidence in ones own judgment.
  • Never cease to do your own thinking.
  • A man must not swear eternal allegiance to either the bear or bull side.
  • The individual fails to stick to facts!
  • People believe what it pleases them to believe.
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