Archives of “profits” tag

rss

Jack Schwager :Risk & Reward

  
  Education
#  #  #  #  #  #  #  #  #  #  #

“In one experiment, subjects were given a hypothetical choice between a sure $3,000 gain versus an 80 percent chance of a $4,000 gain and a 20 percent chance of not getting anything. The vast majority of people preferred the sure $3000 gain, even though the other alternative had a higher expected gain (0.80 X $4,000 = $3,200). Then they flipped the question around and gave people a choice between a certain loss of $3,000 versus an 80 percent chance of losing $4,000 and a 20 percent chance of not losing anything. In this case, the vast majority chose to gamble and take the 80 percent chance of a $4,000 loss, even though the expected loss would be $3,200.

In both cases, people made irrational choices because they selected the alternative with the worse expected gain or greater expected loss. Why? Because the experiment reflects a quirk in human behavior in regards to risk and gain: people are risk averse when it comes to gains, but risk takers when it comes to avoiding a loss. And this relates very much to trading. It is exactly the quirk in human psychology that causes people to let their losses run and cut their profits short. So the old cliché of let your profits run and cut your losses short is actually the exact opposite of what human nature tends to do.”

The Process of Invention

  
  Education
#  #  #  #  #  #  #  #  #

When inventing your own trading system or strategy as I prefere to call it, you are constantly asking questions. In a sense, you enter into a passive relationship to the market where it is telling you about itself – thats the big change in mindset from being a newbie. When you are a newbie you want the market to do what you want (i.e. “my system says it should go up, so GO UP!”). At the same time as demanding, you are hoping – your WILL is involved.

When you enter this frame of mind I’m talking about, you have no more demands of this nature, but rather are trying to get ‘in step’ with what the market is and how it behaves – you subordinate your will to the will of the market; it speaks to you if you shut up and listen. For instance, the market suddenly turns on a dime and you give back all your profits. The market has spoken to you and said “sometimes I have unexpected price shocks and it looks like this”.
Instead of cursing this event a question suddenly arises in your mind such as “Hmmm….. I need to think of a way to deal with price shocks.” You ponder this like a puzzle – you try some things, and think about it. This is the process of invention.

Believe me, when at the end of this you have a way to deal with, for instance, sudden turns in price action you will NOT struggle to force yourself to stick to the “rule” – this rule is not imposed on you from outside, you created it. The process was also interesting, challenging and enjoyable; you are a creative trader who is genuinely interested in the subject.

Which type of trader?

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

Which type of trader?

Traders

Please which one of the following belong to you?

there are many type of traders, an awareness of the varieties allows you to avoid the pitfalls.

THE DISCIPLINED TRADER.

This is the ideal type of trader, you take your profits and loses with ease, you focus on your system and follow it with discipline.Trading is usually a relax activity,you appreciate that a loss does not make you a looser.

THE DOUBTER.

you find it difficult to execute at signals, you doubt your won abilities.You need to develop confidence.Perhaps you should paper trade.

BLAMER

All losses are someones else ‘s fault, you blame bad fills, your broker for picking the phone up to slowly , our system for not being perfect, you need to regain your objectivity and self-responsibility.

VICTIM

You blame yourself, you feel the market is out to get you, you start becoming superstitious in your trading.

OPTIMIST.

You start thinking it’s only money , ill make it back later. you think all losses will bounce back to profits, or that you will start trading properly tomorrow.

GAMBLER.

You are in for the trill, Money is a side issue. Risk and reward analysis hardly figure in your trade, You want to be a player, want the buzz and excitement.

TIMID.

You enter a trade, but panic at the sight of a profit and take it far to soon, Fear rules your trading.

17th Century Rules of Speculation

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Rules of Speculation

  1. Never advise anyone to buy/sell shares. Where guessing correctly is a form of witchcraft, council cannot be put on airs.
  2. Accept both your profits and regrets. It is best to seize what comes to hand when it comes, and not expect that your good fortune and the favorable circumstances will last.
  3. Profit in the share market is goblin treasure: at one moment it is carbuncles, the next it is coal, one moment diamonds, and the next pebbles. Sometimes, they are the tears that Aurora leaves on the sweet morning’s grass, at other times, they are just tears.
  4. He who wishes to become rich from this game much have both money and patience.

Note: these rules are from “Confusion of Confusions” by Jose de la Vega in the year 1688. Vega was a successful merchant, poet, and philanthropist residing in the 17th century Amsterdam. This book represents the oldest known hints of technical analysis and his accounts of the Dutch markets in the 17th century.

Gratitude

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #

Wanna thank you, Wanna thank you
Freedom in stride, love, peace of mind
We just wanna give Gratitude – Earth Wind & Fire

Thank you, Lord, for what you’ve done for me
Thank you, Lord, for what you’re doing now
Thank you, Lord, for ev’ry little thing
Thank you, Lord, for you made me sing – Bob Marley

“He is a wise man who does not grieve for the things which he has not, but rejoices for those which he has” – Epictetus

If you book 10 points on the day are you the type of trader that is mad about the 15 pts left on the table or grateful about the 10 you pocketed? A consistently profitable trader is a continuously grateful trader. When you are grateful for what you have you operate out of a state of abundance. How many times have you become upset about missing a trade you were waiting for, or about how many points you left on the table, or about getting stopped at the extreme of a move only to see the trade reverse in your favor? It happens to all of us and we all do it. It is normal to think we should have booked more profits or done better – that is a characteristic of most traders – we are never satisfied and always think we can improve on our performance. The key is to be thankful and grateful for what we do get. By maintaining a thankful and grateful mindset it opens the way for abundance and blessings to come into your life.

ART OF TRADING Golden Rules

  
  Education
#  #  #  #  #  #

1. Always wait for the setup: No Setup-No Trade.

2. THE BEST trades work almost right away.

3. Never take a big loss. If it doesn’t ‘feel’ right. Remove it!

4. Always perfect your craft and sharpen your skills(good traders are constantly learning)

5. Be patient with winning trades: Impatient with trades that fight back.

6. DISCIPLINE is the key to winning at everything!

7. Never get emotionally attached to trades, trading, losses or profits.

8. Always trade with the size that makes you unemotional(emotional trading is the quickest way out of this game).

9. Keeps things simple and do not over-think or over-complicate your trading. LESS IS ALWAYS MORE.

10. Stay humble at all times.

 

What enables a trader to exit every trade the same way, with confidence?

  
  Education
#  #  #  #  #  #  #
  • Preparation:  If you put yourself in the best possible position and you lose money at least you spent that money wisely.  Good things happen to those that are prepared because 90% of people do not know how to do it or are unwilling.  
  • Purpose: Acting with purpose.  You prepared, you knew the risks, you executed the way you wanted to execute.  In cold blooded evaluation you would do it the same with the information you had at the time.
  • Protection:  Losing the invisible money is how I have seen many people blow up.  Invisible money is not locking in profits or losing more than your plan allowed.  If you lose what you intended to risk you own the trade, if you lose more the trade owns you.

Your goal as a trader is to always reduce the time it takes to analyze, react, and recover.  The best traders do this effortlessly after much thought, experiment, and practice.  I lacked confidence because I thought about the wrong things or not at all and I was doing random things all of which made it too costly, emotionally and financially, to practice.

Three Pieces of Trading Wisdom

  
Economy, Education
#  #  #  #  #  #  #  #  #  #  #  #  #

3thought1) Before you put your capital at risk, have a well-formed trade idea;
2) When your idea pays you out quickly, take some profits;
3) Don’t get caught up in individual trades; focus on profitability over a series of trades and days.
I know, I know. These things sound ridiculously simple. But it’s only been in the 4-5 years that I can look myself in the mirror and say that I’m doing all three consistently. The spinning reverse dunks get the attention in basketball; the long touchdown pass makes the evening replays; and the big winning trades are the ones we like to talk about. The greater part of success, however, boils down to Xs and Os on the basketball court; blocking and tackling on the football field; and following basic fundamentals about framing and managing trades. It may not be sexy to execute on the fundamentals, but it gets the job done day after day and builds a career.

These 16 Rules Will Make You A Better Trader

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

1. Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position… not ever, not never! Adding to losing positions is trading’s carcinogen; it is trading’s driving while intoxicated. It will lead to ruin. Count on it!

 2. Trade Like a Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.16

3. Mental Capital Trumps Real Capital: Capital comes in two types, mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.

4. This is Not a Business of Buying Low and Selling High: It is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.

5. In Bull Markets One Can Only Be Long or Neutral, and in bear markets, one can only be short or neutral. This may seem self-evident; few understand it, however, and fewer still embrace it. 

6. “Markets Can Remain lllogical Far Longer Than You or I Can Remain Solvent.” These are Keynes’ words, and illogic does often reign, despite what the academics would have us believe. (more…)

10 Points -Why Traders lose Money

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

  1. Not honoring your original stops. Big losses make winning systems losing ones.

  2. Quit trading it during draw downs. All systems have losing streaks, the key is to manage risk and stick to it until the system gets make to a winning streak.
  3. Lack of discipline, drifting from taking defined entries and exit signals to opinions is hazardous.
  4. Trading too big, no system can survive huge positions sizing that makes the first string of losses the last.
  5. Style drift is deadly, slowly changing your trading plan during active trades is not good. Research comes after hours and before changes are made. (more…)
Go to top