Paul Tudor Jones
Turned $1.5 million into $300 million in five years
“That cotton trade was almost the deal breaker for me. It was at that point that I said, “Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?”
I had to learn discipline and money management. I decided that I was going to become very disciplined and businesslike about my trading. I spend my day trying to make myself as happy and relaxed as I can be.
If I have positions going against me, I get right out; if they are going for me, I keep them. I am always thinking about losing money as opposed to making money. Risk control is the most important thing in trading. I keep cutting my position size down as I have losing trades. (more…)
Archives of “rest of the day” tag
rss5 Trading Mistakes & Destroy Yourself
Instead of cutting a loss the trader holds it stressing over it for the rest of the day or a week. This destroys the trader’s mental capital and inflicts completely unnecessary emotional pain. The first loss it the best loss.- A trader that trades their opinion instead of the price action has a lower success rate than someone who just trades price action. The vast majority of traders make money by following trends and chart patterns not their own opinion.
- A trader who puts on the one big trade that they think they just can’t lose on is usually the one that blows up their account. A trader must always have stops and must always manage risk regardless of their belief in any one trade.
- Believing that you are right about a trade and the market is wrong is a sure path to destruction. The market is always right because price is reality. How do we know when we are wrong? We lose money that is proof enough.
A trader who endlessly searches for stock picks and predictions instead of learning how to trade a robust method while managing their own mind and using risk management is doomed to failure.
8 Trading Tips
1. Know that you can’t control the markets: but you can be well-prepared.
2. Set aside time to prepare: Block out an hour before the markets open through the first hour of trading to make final plans for the day and focus only on your markets.
3. Generate a Trading Plan: Create a Trading Plan and stick to it! Having a plan in place can ease your mind, give you direction and help focus your efforts for profitability. It allows you to control how you will use your trading time.
4. Take a deep breath: You know you can’t control the markets so take a deep breath knowing what you can control – your trading decisions – and don’t let emotion or anxiety get in the way. You can also take a few moments to clear your mind with relaxation and meditation exercises.
5. Turn off all potential distractions: Avoid all potential distractions. When your day starts, make sure you don’t begin it with a potentially distracting activity like Twittering and checking email. Start with a focus on the markets and on how you will perform today. You will feel good about yourself for being well-prepared.
6. Stay positive! There is plenty of research proving the power of positive thinking and general thought on one’s life. Creating a positive approach right from the start of the trading day will have a positive influence on your trading during the rest of the day.
7. Separate emotion, anxiety and the facts: The one reason people feel like trading failures is because they allow their emotions and anxiety to control their actions rather than sticking to the facts of charts and information.
8. Admit that you will win some and lose some: Not everyone can win every time in the markets, but allowing yourself to accept that you will win some and lose some will help you brush off any emotions and anxiety that you feel so you can focus back on winning.
Wisdom of Market Wizards
“Perhaps the most important rule is to hold on to your winners and cut your losers. Both are equally important. If you don’t stay with your winners, you are not going to be able to pay for the losers.” – Michael Marcus
“The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of nonspeculative activity, the greater the significance of technical breakouts.” –Bruce Kovner
My take – Most commons are pennants and flags. And most obvious failed outbreaks are candles ended with the close below the intended trendline.
“The most important rule is to play great defense, not great offense. Everyday I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum drawdown. Hopefully, I spend the rest of the day enjoying positions that are going in my direction. If they are going against me, then I have a game plan for getting out.”
“… I believe the very best money is to be made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all the money by catching the trends in the middle. Well, for twelve years, I have often been missing the meat in the middle, but I have caught a lot of bottoms and tops. If you are a trend follower trying to catch the profits in the middle of a move, you have to use very wide stops. I’m not comfortable doing that. Also, markets trend only about 15% of the time; the rest of the time they move sideways.”
“Don’t focus on making money; focus on protecting what you have.”
–Paul Tudor Jones (Big Big Big Fund Manager)
“The most important is discipline – I am sure everyone tells you that. Second, you have to have patience; if you have a good trade on, you have to be able to stay with it. Third, you need courafe to go into the market, and courage comes from adequate capitalization. Fifth, you need a strong desire to win.”
“You should have the attitude that if a trade loses, you can handle it without any problem and come back to do the next trade. You can’t let a losing trade get to you emotionally.” –
Gary Bielfeldt