- When you are confused and don’t know what to do, do nothing.
- There are no set ups on your watch list, then don’t trade.
- You are a trend trader and there is no trend to trade.
- The market is extremely volatile due to headline risk.
- You want to make an option trade but the options are illiquid with a huge bid ask spread.
- If you are trying to trade supply and demand but the government keeps interfering with your market, pick a different market.
- Your stock reports earnings the next day and you expect a powerful move but it could easily go either way, wait until after earnings to trade.
- You are a momentum trader but their is not momentum, then wait.
- You play the long side only and the market is in a correction or a bear market, wait for a new trend to the upside.
- If you are not at your best mentally and emotionally then don’t trade until you are.
Archives of “risk” tag
rss
Byron Wien's Lessons Learned
I was scheduled to speak about the world outlook at an investment conference recently and shortly before my time slot the conference organizer said the audience was more interested in what I had learned over the course of my career than what I had to say about the market. I jotted a few notes down and later expanded and edited what I said that day. I have since been encouraged to share my thoughts with a broader audience.
Here are some of the lessons I have learned in my first 80 years. I hope to continue to practice them in the next 80.
- Concentrate on finding a big idea that will make an impact on the people you want to influence. The Ten Surprises, which I started doing in 1986, has been a defining product. People all over the world are aware of it and identify me with it. What they seem to like about it is that I put myself at risk by going on record with these events which I believe are probable and hold myself accountable at year-end. If you want to be successful and live a long, stimulating life, keep yourself at risk intellectually all the time.
- Network intensely. Luck plays a big role in life, and there is no better way to increase your luck than by knowing as many people as possible. Nurture your network by sending articles, books and emails to people to show you’re thinking about them. Write op-eds and thought pieces for major publications. Organize discussion groups to bring your thoughtful friends together.
- When you meet someone new, treat that person as a friend. Assume he or she is a winner and will become a positive force in your life. Most people wait for others to prove their value. Give them the benefit of the doubt from the start. Occasionally you will be disappointed, but your network will broaden rapidly if you follow this path. (more…)
"6 Skills For Traders"
Whether it is day trading, scalping, or investing,there are fundamental skills that each trader should master. Skill-building activities will help you sharpen your ability to make money and cash in on critical market movements.
1. Don’t Be a Perfectionist
Consistent profits are achieved from winning more than you lose – not winning every single trade.There are plenty of professional traders who generate profits by winning just 10% of their trades by maximizing gains and minimizing their losses.
2. Stick to a Trading Plan
Developing a trading plan is extremely important.Day trading around your own set plan for each position will produce consistent profits. A trading plan planner should be your best friend when developing your own trading
style. The key is sticking to what you’ve written down on paper.
3. Know the Odds
You should know the payoff odds for each trade that you take.Scalping produces large gains from small movements with higher risk than swing trading. Your trading plan should include a way to regulate how much capital you’re willing to risk on each position – but you should never risk more than 2% of your total account value. (more…)
4 Trading Mistakes
1. Do the Math
Sit down and go over your expected Risk to Reward Ratio for each trade. If you have already been trading for a period of time sit down and analyse how much you are making each trade and your winning %. These two numbers will help you formulate a solid profit goal. No trading strategy works 100% of the time so you need to work out how much you lose per losing trade vs. how much you make per winning trade and then figure in your percentages. From there you should have a realistic idea of how much you can expect to make in through your trading.
2. Don’t Expect Instant Returns
Trading is a business and like any other business it requires not only capital investment but time investment as well. It takes time to find your rhythm and develop your trading skills. Try not to be to hard on yourself during the learning phase and remember to focus on the positive aspects of your trading. The vast majority of traders lose money and this number is even higher with traders who are just starting out. Factor this in when you are setting your goals.
3. Skill vs. Profits
Try to come up with goals that are not directly tied to your P&L statements. For example, set a goal of following your rules for every trade for an entire trading day. Once that is completed shoot for an entire week, then a month, and pretty soon you will be doing following your rules without even realising it. Train yourself to develop your trading skills and reward yourself when you reach those goals.
4. It Takes Money
It takes money to make money. Small accounts are fantastic for testing out whether or not trading is for you but when you get serious and want to go full time make sure you have enough capital to support your business. Solid traders should expect to make 8% in the market over the course of a month. That equates to 96% over a given trading year. Make sure this figure allows you to have the lifestyle that you are expecting.
Wisdom from Market Wizards
Tony Saliba
“How do you lose money? It is either bad day trading or a losing position. If it’s a bad position that is the problem, then you should just get out of it.”
“Clear thinking, ability to stay focused, and extreme discipline. Discipline is number one: Take a theory and stick with it. But you also have to be open-minded enough to switch tracks if you feel that your theory has been proven wrong. You have to be able to say, “My method worked for this type of market, but we are not in that type of market anymore.”
“Until recently, I set goals on a monetary level. First, I wanted to become a millionaire before I was thirty. I did it before I was twenty-five. Then I decided I wanted to make so much a year, and I did that. Originally, the goals were all numbers, but the numbers are’t so important anymore. Now, I want to do some things that are not only profitable, but will also be fun.”
Dr Van K. Tharp
“The composite profile of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behaviour and would be more likely to be a crowd follower. In addition, losing traders tend to be disorganized and impatient. Thet want action now. Most losing traders are not as bad as the composite profile suggest. They just have part of the losing profile.” (more…)
RISKING
Trading is all about risk Control !The Following excerpt is from one of my favorite audiotapes ,’Risking ‘by David Viscount.I keep this on my desk to remind me each day to keep “Risking .”Only a person who risks is truly free
To laugh is to risk appearing the fool. To weep is to risk appearing sentimental. To reach for another is to risk involvement. To expose your feelings is to risk exposing your true self. To place your ideas, your dreams before a crowd is to risk their loss. To love is to risk not being loved in return. To live is to risk dying. To believe is to risk despair. To try is to risk failure. But risks must be taken, because the greatest hazard in life is to risk nothing. The person who risks nothing does nothing, has nothing, is nothing. They may avoid suffering an d sorrow, but they cannot learn, feel, change, grow, love, live. Chained by their attitudes they are slaves; they have forfeited their freedom. Only a person who risks is free.
Emotions
Emotions are at the root of trading problems. Yes, emotions can interfere with concentration and performance, but that doesn’t mean that they are a primary cause. Indeed, emotional distress is as often the result of poor trading as the cause. When traders fail to manage risk properly, trading size that is too large for their accounts, they invite outsized emotional responses to their swings in P/L. Similarly, when traders trade untested patterns that possess no objective edge in the marketplace, they are going to lose money over time and experience an understandable degree of emotional frustration. I know many successful traders who are fiercely competitive and highly emotional. I also know many successful traders who are highly analytical and not at all emotional. Trading is a performance field, no less than athletics or the performing arts. Success is a function of talents (inborn abilities) and skills (acquired competencies). No amount of emotional self-control can turn a person into a successful musician, football player, or trader. Once individuals possess the requisite talents and skills for success, however, then psychological factors become important. Psychology dictates how consistent you are with the skills and talents you have; it cannot replace those skills and talents.
When does trading become gambling?
When does trading become gambling? There is a very thin line. I maintain that most traders ARE gamblers. They use markets as a substitute for a casino. Here are some of the sign posts that you have crossed the line. I love Jeff Foxworthy so I will steal his “you just might be a redneck.”
1. IF you enter trades without a clear trading plan, you just might be a gambler.
2. IF you trade just to be trading, you just might be a gambler.
3. IF your bored and enter a trade, you just might be a gambler.
4. IF you look at potential profit before assessing potential loses, you just might be a gambler.
5. IF you have no impulse control, you just might be a gambler.
6. IF you have no methodology, you just might be a gambler.
7. IF you rely on others for your trading decisions, you just might be a gambler.
8. IF you do not take full responsibility for your trading outcomes, you just might be a gambler.
9. IF you increase your risk due to losses, you just might be a gambler.
10. IF you do not use stop losses or do not adhere to them, you just might be a gambler.
And my all time favorite
11. IF you get an adrenaline rush when your entering trades, you just might be a gambler.
The story of 2 monks and the power of letting go
I believed you have heard of many versions of the story about 2 monks. No? Let me refresh your memory, and explain to you how it is applicable to trading.
There were two Buddhist monks walking along the bank of a river, making their way to back to the temple.
As they were walking, they came across a beautiful lady standing at the side of the river. She stopped them and asked if one of them is willing to help her across the river. The junior monk did not bulge but the senior monk without any doubt, carried her on his back and across the river. The senior monk put her down on the other side and she thanked him profusely and hurried off. The junior monk was taken aback by the gesture but kept to himself. The senior monk returned and they carried on with the journey.
As they walked, the junior monk kept brooding about the incident until it was unbearable and broke the silence, “why did you carry that woman across the river? Knowing that our religion forbid us to touch women!”
The senior monk replied peacefully, “I put her down a moment ago and you are still carrying her.” (more…)
Unavoidable Disappointment
If you’re trading for emotional satisfaction, you’re bound to have lots of problems and continue to struggle, for two reasons. First, often that what feels good is often the wrong thing to do. Second, the game of trading, and it is a game in many respects, involves being disappointed fairly often.
Even for profitable traders a certain number of trades will lose money, and even the winners don’t always work perfectly or match your exact expectations.
As a trader, it’s impossible to avoid disappointment, not every trade is going to work. You get stopped out and then see the trade go on to work without you, or you hesitate and miss the move, or you exit early to book profits and watch the move continue without you. When you think about it, trading involves a lot of disappointment. I cannot think of any other job that involves disappointment on such a regular basis. Even the most successful traders experience this. No way to escape it.
When you experience a lot of disappointment you’re going to experience a high degree of stress. And when stress overwhelms you…and by the way, stress can masquerade as performance anxiety or pressure to succeed, the emotional part of your brain will run right over the logical analytical part of your brain. You’ll know when that happens because that’s when your rules go out the window or you veer from your plan and you take a revenge trade or an impulse trade or you freeze up and hesitate. (more…)