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4 Trading Quotes From Mark Douglas

  
  Education
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There is a random distribution between wins and losses for any given set of variables that define an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.

If you really believe in an uncertain outcome, then you also have to expect that virtually anything can happen. Otherwise, the moment you let your mind hold onto the notion that you know, you stop taking all of the unknown variables into consideration. Your mind won’t let you have it both ways. If you believe you know something, the moment is no longer unique.

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.

The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of positions, cutting my losses short to make myself mentally available to take the next opportunity.

11 More Trading Resolutions for 2011

  
  Education
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  1. I will begin each trading day by asking myself, “Is today a day to make money, limit losses, or do nothing? And then I will trade that way.
  2. I will be aware of my fear and recognize when I’m trading out of fear.
  3. I will stay objective by asking myself, “If I had no position on, what would I do?”
  4. I will listen to myself first and others second, or not at all.
  5. I will trade to make money, not to be right.
  6. I accept that how often I’m right is not as relevant as how much I make when I’m right vs. how much I lose when I’m wrong.
  7. I will manage my risk better by following this simple formula: H+W+P=E (Hoping + Wishing + Praying = Exit the trade).
  8. I will lose money the right way—by using stops.
  9. I will quantify the success of my trade based on the quality of my trading process and not on the profit or loss from it.
  10. I will keep my trades simple. Trading is a game of up, down and sideways. It isn’t complicated, so don’t make it that way.
  11. Finally, I will keep a trading journal.

 

What are you certain about the market or trading?

  
  Education
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If I do not take it will take from me.
You are only as good as your last trade.
Rigidity and complacency ends careers.
Always get paid for taking risk.
A trend never ends when it should.

I am certain that the only way for me to have a chance to be a successful trader is to do daily work and not become lazy or use shortcuts.

I am certain I would rather take every planned trade and lose than not execute a planned trade.

I am certain I am always uncertain before taking a trade. I am certain when I am most relaxed in my mind is when I am doing the right thing regardless of the outcome.

I am certain there is no mathematical (technical) formula to beat the market. If there was, there wouldn’t be a market.

I am certain that opportunities are easier made up for than losses. I add one more: I am certain that the habits or procedures we resist represents our true trading system at that moment.

I am certain that trying to ‘predict’ will end in failure.

I am certain that most of my trades that I convince myself to make investments will end up losing money.  I am certain that if I do not plan a trade including stop loss  points I will be sorry.  I am also certain that I will violate both of the above sometime in the next month.

I am certain that I know myself…. or at least I think I do for the moment.

I am certain that uncertainty is a concept that most traders need to come to terms with before any sort of success will be attained.

10 Big Lies Traders always says…

  
  Education
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1. The losing position wasn’t my fault, the market
    moved against me.

2. The trade was right and the market wrong.

3. I just have bad luck.

4. Eventually the stock will go up (or down)… eventually.

5. Bigger size equals bigger profits.

6. No need to close the postion just yet.I can average down.

7. Because I made so much money on the last trade  I can take on more risk the next.

8. If the market is going down I can’t make  any money.

9. I need to trade a larger account in order to be a better trader.

10. I’ve had many winners in a row, so now I need  a big loser.

Trading is a business

  
  Education
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Trading can be mastered if you concentrate your efforts on how you will react to price rather than desiring to predict it. Reacting is a business decision, predicting is an ego play.

Traders want to make money. Losses in the long run don’t matter. Forecasters (prophets) want to be right (ego). And that’s all that they are concerned about.

Don’t decide anything (ego), let the market do that job for you (business).

Like any other business you have a business plan and the financial portion of that plan is the most important.

In this business your inventory is stocks, bonds, futures or options. Like any other business you define what an acceptable loss is on an item and what is an acceptable profit for the risk undertaken. Like any other business if the item of inventory doesn’t do what you expected it to do, you put it on sale and liquidate it to raise capital to purchase inventory that will do what you want it to do. Your acceptable loss is your stop. Your money management system tells you how much that is. Your mark up is dependent upon your trading system and trading style. It doesn’t make any difference if you are a day trader or an investor. Like any business, some turn their inventory 10 times a day, some 20 times a year and some only twice a year. Your trading style and inventory volatility will tell you what your turnover rate will be.

Trading is a business and if you treat it as anything else you will be a loser.

Know yourself.

  
  Education
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 Easier said than done, but it’s worth spending time understanding who you are in relation to risk, money, hard work, uncertainty, and a number of other things you will face as a trader. While you’re at it, also consider what skills you need to develop: a better understanding of probability? Deeper knowledge of financial markets? Any specific analytical techniques?

There are many ways to work toward the goal of knowing yourself, and it’s probably the process that matters more than anything. Some people will talk to a therapist, some will go on long walkabouts, some will journal and reflect, and some may work on the answers in the quiet moments each day. There’s no wrong way to do this, but the market is going to make you face the best and worst in yourself.

Seven essentials needed to become a competent trader

  
  Education
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  1. Have a vision about your trading. Understand why you trade. It is never just about the money. Money can be had in any endeavor. Develop perspective on why trading is so important to you and what characteristics you want to possess that distinguish you as a trader. Be clear on these. This is motivating, and helps you to keep committed to your personal goals when things become difficult. Trading is a tough business with lots of adversity. If you haven’t got a clear sense of what you are all about in your trading, you will find trading very difficult.
  2. Make a commitment to your vision and turn it into a daily mission. Put into daily practice what you need to do to reach your goals. Put the work in even when other things that are more ‘fun’ or appealing tempt you to get off track. Do these every day, day after day and don’t let up. Keep a journal and track your progress — not just on the money, but more importantly, on your personal progress as you grow and develop into a competent trader. It’s the only way to become good and eventually great at trading.
  3. Know what you can control and what you can’t. You can’t control whether a trade is a winner or a loser. You can control how you react to the market. Before you can become a consistent trader, you must first control how you respond to the market and your actions. We can always be in control of ourselves and how we act. Being able to regulate our actions has a lot to do with how we see ourselves as a trader and our vision for ourselves.
  4. Focus on the process of trading rather than the outcomes of your trades. You can control how you select your trades, set risk, enter, manage, and exit your trades. You can never control how they will turn out. Place your attention on what you can control – the process of trading, not the outcomes. The process is where you can make a difference.
  5. Develop the necessary mental skills to trade well. Technical skills are important, but so are mental skills. Spend time learning how to stay focused on the present moment. Learn how to ‘mentally park’ losses and trading errors. Learn how to let winning trades run and cut losing trades short. These are all crucial mental skills that are not found in reading the MACD or price bars.
  6. Practice your trading. A major league baseball player doesn’t just show up at the ball park and expect to play well; traders shouldn’t expect to just show up at the screen and trade well either. It takes serious, dedicated practice to develop excellence.
  7. Make one trade at a time. Keep your focus on this trade and this trade only. Bring all of your knowledge, skills, and abilities into focus on the current trade. Let previous trades and future trades go – they have nothing to do with the current trade.

The Secret

  
  Education
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FireWalkWhat’s the secret of successful traders and how did they make the transition from clueless learner to consistent pro?When the same tools are available to anyone, why do some people out perform others?

 

The successful traders have discovered The Secret.

 

It is not the latest indicator, program or hot tipster. It is something that everyone has inside them already.

 

The Secret is believing in your method and trading it. Believing to the point of having it ingrained into your brain so that it becomes as automatic as breathing. If the charts do this, then I will do that. Trading your plan means cutting losers, riding winners, managing money and risk well. When you arrive at the point of realizing that your self-discipline can only get you so far and that the next step should be reflex trading then you will have found The Secret.

 

Having to exercise self- discipline to me means that there is still something inside you that you must fight to control. If emotions are still in control of your trading then you must find a way to turn that fear and greed into a move productive energy. Trading your method as a reflex means that there is no struggle to control wayward thoughts. (more…)

THE FIVE IMMUTABLE LAWS OF INVESTING

  
  Education
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Be Patient And Wait For your Trade.  Many investors suffer from “action bias” or a desire to do something.  However, when there is nothing to do the best thing to do is nothing.

 Be Contrarian.  The herd is usually wrong.  The punch bowl of speculation is usually spiked with denial.  Be careful getting in when the getting is at the end.  Risk Is Permanent Loss of Capital, Never A Number.  Pay attention to valuation, fundamental, and financial risks and thus avoid permanent impairment of your capital.

Be Leery of Leverage.  Leverage is a dangerous beast.  It can’t turn a bad investment good, but it can turn a good investment bad.  Whenever you see a financial product with leverage as its foundation you should be skeptical, not delighted.

 Never Invest In Something You Don’t Understand.  If something sounds too good to be true it probably is.  If you do not understand where your money is going then don’t press the pedal ’cause the vehicle may be in reverse. 

Invest when the law is on your side; otherwise you may find yourself on the other side of the barbed wire fence at BROKE prison. 

2 Trading Quotes

  
  Education
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“You can give anyone the best tools in the world and if they don’t use them with good money management, they will not make money in the markets. We’re convinced that a person could make a profit simply by buying and selling the markets according to the dart board if they followed all the right things as far as money management is concerned.”

— Welles Wilder

“Throughout my trading career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.”

— Larry Hite

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