Make all your mistakes early in life. He says the more tough lessons you learn early on, the fewer errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you bad stocks.Always make your living doing something you enjoy. This way, you devote your full intensity to it which is required for success over the long-term.
Be intellectually competitive. This involves doing constant research on subjects that make you money. The trick, he says, in plowing through such data is to be able to sense a major change coming in a situation before anyone else.
Make good decisions even with incomplete information. In the real world, he argues, investors never have all the data they need before they put their money at risk. You will never have all the information you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.
Always trust your intuition. For him, intuition is more than just a hunch. He says intuition resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. In fact, over time your own trading experience will help develop your intuition so that major pitfalls can be avoided.
Don’t make small investments. You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.
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Make all your mistakes early in life. He says the more tough lessons you learn early on, the fewer errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you bad stocks.Wisdom Thoughts for Traders & Investors
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.
2. Always make your living doing something you enjoy: Devote your full intensity for success over the long-term.
3. Be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.
4. Make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.
5. Always trust your intuition: Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.
6. Don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.
1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.The Four Poisons
There is a Korean martial art called Kum Do. This is a brutal game that involves a fight to the death with very sharp swords. The way it is practiced today is with bamboo sticks, but the moves are the same. Kum Do teaches the student warriors to avoid what are called “The Four Poisons of the Mind.” These are: fear, confusion, hesitation and surprise. In Kum Do, the student must be constantly on guard to never anticipate the next move of the opponent. Likewise, the student must never allow his natural tendencies for prediction to get the better of him. Having a preconceived bias of what the markets or the opponents will do can lead to momentary confusion and—in the case of Kum Do—to death. A single blow in Kum Do can be lethal, and is the final cut, since the object is to kill the opponent. One blow—>death—>game over.
Instead of predicting, anticipating, and being in fear and confusion, you must do exactly the opposite if you are to survive a death blow from the market movements. You must watch with a calm, clear and collected attitude and strike at the right time. A few seconds of anticipation, hesitation or confusion can mean the difference between life and death in Kum Do—and wins or losses in the stock markets. If you are not in tune with the four poisons of fear, confusion, hesitation or surprise in the markets, you are at risk for ruin. Ruin means that your money is gone and the game is over.
How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise?
Replace fear with faith—faith in your trading model and trading plan
Replace confusion with the attitude of being comfortable with uncertainty
Replace hesitation with decisive action
Replace surprise with taking nothing for granted and preparing yourself for anything.
Six Rules of Michael Steinhardt
Michael Steinhardt was one of the most successful hedge fund managers of all time. A dollar invested with Steinhardt Partners LP in 1967 was worth $481 when Steinhardt retired in 1995. The following six rules were pulled out from a speech he gave:
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Sex appeal and Trading
Trading is marketed as sexy profession. If you are good at trading, well you must be incredibly smart, good looking, funny, and of course, rich! We all know this furthest from truth. Traders are pale, unkept and have bad posture. I kid.
One of the biggest aspects of of trading is psychology, the manipulation and control of our biggest sex organ of all, our brain. However, an often overlooked aspect of trading psychology is mental framing – how we position our thoughts and ideas about the market. (more…)
The 7 Best Ways to Exit a Trade
In trading the money is not made in the entry, it is in the exit. The art of the exit is crucial to a traders success in the markets. Profits can disappear if you do not take them at the right time, small losses can become huge losses if you do not cut them. Small profits can become huge profits if you let them run until they truly stop. Keeping capital tied up in a trade going nowhere and just letting it sit there can cause you to miss out on other great opportunities.
So what is a trader to do?
- Use stop losses, only risk 1% of your total trading capital on any one trade, when you have lost that 1%, get out. Position sizing, stop losses, and understanding volatility is key.
- Enter trades right at break out points to new highs or off key price support levels or key moving average support levels. If it loses that support later and fails to retake it quickly then sell it.
- Buy when a stock is one ‘R’ multiple above a key support level, sell if it falls back and loses that support level. (One ‘R’ multiple = 1% of total trading capital).
- Use a ‘stale’ or ‘time’ stop: Set a time limit on how long you will give a trade to move a certain amount, if it fails to move enough fast enough, get out.
- Volatility stop. The market or your stock has a big expansion in its daily price range or starts moving against you the full daily range. You either cut your position down in size or get out due to increased risk.
- You trail a stop loss behind your winner, when it reverses and hits that stop you sell. A trailing stop can be a moving average or a percentage you your gain.
- You sell your position because you have found a much better trade with a better probability of success or a bigger upside.
The key above all else is always to have a plan to get out of every trade before you get in. Before each trading day begins think about what you will do based on the price levels your open trade is at.
6 Mistakes
Mistake number one: not having any knowledge of the simple visual indications for when to enter a trade based on market behavior and common sense.
Mistake number two: not being on the right time frame at the right time for the current trading opportunity.
Mistake number three: entering trades long AFTER the real entry occurred and exiting way BEFORE the exit occurs.
Mistake number four: no trading plan or direction for a consistent entry and exit strategy.
Mistake number five: following some scam Forex system they recently bought on the internet and using dozens of “proprietary” indicators.
Mistake number six: entering and exiting trades for reasons other than their own trading method. (fear, greed, etc)
Sex Appeal and Trading
Trading is marketed as sexy profession. If you are good at trading, well you must be incredibly smart, good looking, funny, and of course, rich! We all know this furthest from truth. Traders are pale, unkept and have bad posture. I kid.One of the biggest aspects of of trading is psychology, the manipulation and control of our biggest sex organ of all, our brain. However, an often overlooked aspect of trading psychology is mental framing – how we position our thoughts and ideas about the market.
Newer traders approach trading from a “right versus wrong” perspective. They devise their trading system based on a false sense of security believing certain setups and strategies can be designed to give them”right” signals and helps them avoid “wrong” signals. (more…)
Four Poisons
There is a Korean martial art called Kum Do. This is a brutal game that involves a fight to the death with very sharp swords. The way it is practiced today is with bamboo sticks, but the moves are the same. Kum Do teaches the student warriors to avoid what are called “The Four Poisons of the Mind.” These are: fear, confusion, hesitation and surprise. In Kum Do, the student must be constantly on guard to never anticipate the next move of the opponent. Likewise, the student must never allow his natural tendencies for prediction to get the better of him. Having a preconceived bias of what the markets or the opponents will do can lead to momentary confusion and—in the case of Kum Do—to death. A single blow in Kum Do can be lethal, and is the final cut, since the object is to kill the opponent. One blow—>death—>game over.
Instead of predicting, anticipating, and being in fear and confusion, you must do exactly the opposite if you are to survive a death blow from the market movements. You must watch with a calm, clear and collected attitude and strike at the right time. A few seconds of anticipation, hesitation or confusion can mean the difference between life and death in Kum Do—and wins or losses in the stock markets. If you are not in tune with the four poisons of fear, confusion, hesitation or surprise in the markets, you are at risk for ruin. Ruin means that your money is gone and the game is over.
How can you avoid the four poisons of the trading mind: fear, confusion, hesitation and surprise? (more…)
The art of War
Sun Tzu, the author of The Art of War, would make a great stock trader. Although The Art of War is a 2500 year old military treatise it could just as easily be written for today’s stock trader as the principles outlined therein are as applicable in the stock market as in the theatre of war. I read The Art of War again this past weekend and highlighted what I believe are some of the most pertinent and applicable principles for stock traders as seen through the eyes of Sun Tzu the would be stock trader. Make sure you copy and post these in a prominent place for quick reference when in the heat of battle.
I. 17 When the market is rewarding your trading strategy, you should modify your position sizing accordingly.
I. 26 Now the successful trader prepares before he enters battle. The unsuccessful trader makes but a few, if any, preparations before he enters battle. Proper preparation leads to victory; a little preparation leads to defeat; and no preparation leads to ultimate destruction! The one who is properly prepared is the one who is most likely to win.
II. 7 Appreciating the gains better helps you accept the losses.
II. 19 In trading, let your great object be a quick and decisive victory, not the slow death of a lengthy loss.
III. 18 If you know who the enemy is and you know yourself, you will never fear the next trade. If you know yourself but not the enemy, you will win one lose one. If you do not know the enemy or yourself, you will lose on each trade.
IV. 1 The good traders of old first put themselves beyond the possibility of defeat and then waited for the right time to defeat the enemy.
IV. 4 It is possible to know technical analysis without being able to properly apply it.
IV. 13 The successful trader wins his battles by making no mistakes. Making no mistakes establishes the certainty of victory.
V. 13 The quality of entry is like a well-timed swoop of a falcon which enables it to strike and destroy its victim.
V. 15 Proper preparation may be likened to the bending of a crossbow; decision, to the releasing of the trigger.
VI. 5 Take advantage of opportunities such as support and resistance where the enemy must put up a strong defense; take swift action and catch the enemy off guard.
VI. 19 Be prepared for battle by knowing the exact time and place for proper trade entry.
VI. 32 Just as water retains no constant shape, so in trading know the market is constantly changing.
VII. 5 Trading with familiar stocks is advantageous; with unfamiliar most dangerous.
VII. 13 We are not properly prepared to trade a stock until we are familiar with the most likely direction of the general market.
VII. 21 Ponder and deliberate before you enter a trade.
VII. 28 Now the trader’s spirit is keenest in the pre-market; by noon day it is becoming weary; and by post market ready to relax.
VII. 32 To refrain from entering a market that is prepared to defend its current course is the art of practicing patience by studying current market conditions.
VIII. 3 There are trades which must not be taken; sectors that are not ready to be attacked; patterns that are set up for failure; positions that are to be surrendered; egotistical commands that are not to be obeyed.
IX. 28 In a mixed market when some stocks are seen advancing and some retreating, it is a trap.
IX. 41 He who does not think through his trade while making light of the situation is sure to fall victim to a loss.
X. 24 The trader who makes money without coveting fame and loses money without fearing disgrace, whose only thought is to protect his equity and ignore his ego, is considered to be a jewel of the kingdom.
XI. 17 When it is to the trader’s advantage, he will enter a trade; when otherwise he will not.
XI. 67 Trade in the path defined by rules and do not face the enemy until you feel you can trade with confidence.
XII. 15 Unhappy is the fate of the trader who tries to win his battles and succeed in his decisions without cultivating the spirit of confidence, for the result will be a waste of time and a drain on his trading account.
XII. 17 Do not trade unless you see there is an advantage in doing so; use not your money unless there is something to be gained.
XII. 22 The successful trader is heedful and full of caution. This is the way to have peace of mind and to live to trade another day.
XIII. 4 What enables the wise and successful traders to trade and conquer, and achieve things beyond the reach of ordinary traders, is proper preparation.