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Eleven Rules

  
  Education
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Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.

Rule #8
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.

Rule #9
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.

Rule #10
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.

Rule #11
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.

Characteristics of Profitable Traders

  
  Education
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They are experienced – Probably the most horrifying and worst myth shot out to anyone considering trading for a living is that you will compound millions in an extremely short amount of time. The only true way to make every day profitable comes through experience, and countless hours learning is crucial to longevity of success.

They know the damage they are capable of – Notice I didn’t say potential or profits here. The best traders I know of understand their limits, and seem to focus more on what can go wrong than what can go right. They are not easily convinced of lucrative outcomes, and have a very high sense of self-awareness.

They trade to make money, not to be right – They understand the strengths and possible pitfalls of what it is they do for a living, and use that knowledge to curb their emotional output.

They have an edge and know how to use it – They understand that without it they wouldn’t last long

They have a gameplan, and follow it explicitly – Each trade is planned and opportunities are scouted for before any trading takes place. They steer away from the killer of all killers: overtrading.

They manage risk – Regardless of how much conviction they have on a trade, they will still do what they can to avoid the potential of any losses and understand rule #1 about trading: anything can happen.

They work obsessively – They follow each turn, each piece of info that comes out in regards to their trade, and follow any underlying information relevant to failure or success.

They only access the best information – Information rules in trading, and having some of the best translates to money. Using the wrong information leads to failure.

They think about the trade, not the money behind it – Focusing on money can destroy your means to objectively assess the trade itself.

They are constantly learning – Just when you think you know it all about trading, a new curveball gets thrown your way, not to mention there are continued means and methods to be learned about making money. Even the most highly successful trader I ever knew, a multi-billion dollar portfolio manager, has a team of fundamentalists and technicians come in to train and retrain himself and his traders.

They are active – Activity sparks creativity, a very crucial part of trading.

They have patience – They understand that the money will come, but everything needs to be in place, first.

11 Rules For Better Trading

  
  Education
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Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment. (more…)

11 Rules for Chart Watchers

  
  Education
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LOOKING-CHARTRule 1 – If you cannot see trends and patterns almost instantly when you look at a chart then they are not there. The longer you stare, the more your brain will try to apply order where there is none.

If you have to justify exceptions, stray data points and conflicting evidence then it is safe to say the market is not showing you what you think it is.

Rule 2 – If you cannot figure out if something is bullish or bearish after three indicators then move on. The more studies you apply to any chart the more likely one of them will say “something.” That something is probably not correct.

When I look at a chart and cannot form an opinion after applying three or four different types of indicators – volume, momentum, trend, even Fibonacci – I  must conclude that the market has not decided what it wants to do at that time. Who am I to tell it what it thinks?

Rule 3 – You can torture a chart to say anything you want. Don’t do it.

This is very similar to Rule 2 but it there is an important point to drive home. You can cherry pick indicators to justify whatever biases you bring to the table and that attempts to impose your will on the market. You cannot tell the market what to do – ever.

Rule 4 – Be sure you check out one time frame larger than the one in which you are operating (a weekly chart for a swing trader, a monthly chart for a position trader).

It is very easy to get caught up in your own world and miss the bigger picture getting ready to smack you. It can mean the difference between buying the dip in a rising trend and selling a breakdown in a falling trend.

Rule 5 – Look at both bars (or candles) and close-only line charts to see if they agree. And look at both linear and semi-logarithmic scaled charts when price movements are large. (more…)

The beginning of real success as a trader starts with knowing yourself.

  
  Education
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“Know yourself. – You can’t improve on something you don’t understand”.
Vince Lombardi Leadership Rule#1
 
One common trait amongst nearly all successful traders is that they have a very high understanding of who they are and how they operate. As an example, leading traders realise that they are not in control of the market; they tend to view the market almost as a force of nature without a personality, and with no agendas, the only thing they can do is control their own actions, activities and emotions. In other words they understand the way they work, what drives them and their performance, how their mind operates, and their emotions. Not necessarily on a conscious level, but nonetheless they have an understanding of how it all works.  
 
As an analogy considers a competitive yachtsman, he has to take account of the conditions of the sea and the winds; however, it is his own actions and decisions that will deem how successful he is. He can not blame the sea or the wind for failure, he has to put all his efforts in to his sailing, making correct decisions and performing the correct actions. (more…)

Eleven Rules for Traders

  
  Education
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Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.

Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies. (more…)

11 Trading Rules

  
  Education
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Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.

Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.

Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.

Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.

Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.

Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.

Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment.

Rule #8
Confidence and conviction. Believe in your strategies and bet wisely but with conviction. There is nothing more frustrating than having a good strategy work as you expect, yet at the end of the day, you have very little winnings to show for your efforts.

Rule #9
Persistence. It takes persistence to operate in the markets. Success doesn’t come easy, and if it does, then I would be careful. Even the best strategies come with losses, and they always seem to come when you get the nerve to make the big bet. Stay with your plan. If you have done your home work, the winning trades will follow.

Rule #10
Passion. In the end, trading has to be about your bottom line, but you have to love what you do and no amount of money is worth it if you aren’t passionate about the process. No matter how much success you enjoy, in the markets you can never stop learning.

Rule #11
Take care of yourself. No amount of money is worth it if your health is failing or you have managed to alienate yourself from family and friends in the process.

You might be a bad trader if……….

  
  Education
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There are young people in the market that are really bad traders and there is also old traders that are very good, but there are no old bad traders in the market because they went broke and gave up a long time ago.

You might be a bad trader if……….

…your primary method is to try to call tops and pick bottoms.

“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.”  -Bernard Baruch

 You might be a bad trader if……….

…instead of benefiting from the 200 point run in Apple this year you actually lost money by fighting the trend.

“Cardinal Rule #1 is to sell short only during what you believe is a developing bear market, not a bull market.” -William O’Neil (more…)

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