The hardest lesson I have had to learn is to “Act in my own best interest”. And to overcome and correct things like:
1) trading without a stop
2) refusing to admit I am wrong and to get out of a losing position
3) trading for the sake of trading
4) chasing entries (going long on the top tick, shorting on the bottom tick)
5) revenge trading (after a series of losses)
6) trading while sick or tired
7) trading without a plan (entry, exit, money management rules)
8) …
Anytime that I am in a position and either don’t know why I am, or what my profit target is, or what my stop loss is, etc. – I am not acting in my own best interest and have always struggled to close out the position immediately.
The times I have without any further hesitation, it turned out to be a wise choice and saved my butt from significant losses (more so than I already incurred).
The bottom line is that you will do much better in this profession if you can answer YES to the question – “Am I acting in my own best interest”?

Trading Commandments From A Samurai

1. “Accept everything just the way it is.”
= accept the market reality in front of you.
2. “Do not seek pleasure for its own sake.”
= don’t trade for pleasure
3. “Do not, under any circumstances, depend on a partial feeling.”
= don’t jump or out of trade on shallow half-baked impulsive feelings.
4. “Think lightly of yourself and deeply of the world.”
= don’t take your trading skills too seriously, take the ability of market to surprise seriously.
5. “Be detached from desire your whole life long.”
= make money, but don’t let money make you.
6. “Do not regret what you have done.”
= smile at your mistake, laugh off your profit.
7. “Never be jealous.”
= what you’ve got is good and enough and incomparable
8. “Never let yourself be saddened by a separation.”
= a loss is never final. it either stays back as lesson or returns as profit.
9. “Resentment and complaint are appropriate neither for oneself or others.”
= accept the reality, keep the power with yourself by not complaining.
10. “In all things have no preferences.”
= don’t measure your profit or loss, just measure them by the lesson or experience.
11. “Do not act following customary beliefs.”
= dare to think!
12. “Do not collect weapons or practice with weapons beyond what is useful.”
= a handful of tools are enough if you are willing to submit.
13. “Do not fear death.”
= do not fear unforeseen loss.
14. “Do not seek to possess either goods or fiefs for your old age.”
= don’t trade under pressure to accumulate profit. if you remain alive, markets will always be there. just keep learning the game.
15. “Respect Buddha and the gods without counting on their help.”
= respect luck, acknowledge god’s blessing, but don’t drag them in the market.

A Trade or a Gamble?

I love to trade a lot – which is of course a euphemistic way of saying I love to gamble. Although I have been to Vegas more than a dozen times I never laid down so much as a dollar bet in any casino. I have absolutely no interest in backjack, craps, slot machines or any other games of chance and I look down with disdain at the excited masses crowding the cavernous Vegas gambling halls. But deep down, if I am honest with myself, I have to admit that whenever I trade a lot I am just as much of a sucker as every hopeless loser that gives up his hard earned money to Steve Wynn or Sheldon Adelson

If you are constantly trading just for the sake of trading, just for the rush of being “in the game”, just for the momentarily thrill of being right you are gambling. You are trading without an edge, without any solid information and are therefore completely vulnerable to the random vagaries of price. (more…)

Aim Small, Miss Small

As many of you already know, one of the biggest factors in successful trading is how well you manage the trade – that is the stop-losses you place, the amount of capital that you put to work, where you take profits, and how you protect the profits that you already have. You could, no doubt, write many books on each of these subjects, but for now, I’m going to focus on a small, but critical aspect of risk-management and my inspiration comes from the movie “The Patriot”, which happens to be one of my favorite movies of all time.

In the clip below, Benjamin Martin (the father) asks his two young boys, “What Did I tell ya ‘fellas about shooting?” and they replied, “Aim Small, Miss Small”. Every time I hear those words I tell myself how true they ring across so many spectrums of life. As an avid hunter, if you just aim the gun at the direction of the game you are targeting, you are bound to miss. However, if you pick out a tiny, specific area of the animal, whether its the upper-right side of the chest, or some other smaller area, you have a much better chance of hitting your target. In fact, the smaller the target area, the lesser amount of margin for error you have in missing.

So how does this apply to trading, you must be asking? The stop-loss that we set in relation to our entry price is a reflection of our “Trading-Aim”

When I trade, I look for setups that are as close as possible to a desirable stop-loss. By desirable, that means I’m not just picking a spot that is 1 or 2% from my entry price for the sake of it being so, instead, if I am long, I am going to look to place a stop-loss somewhere underneath a critical support level, and if I am short, then I am going to place a stop just above an area of resistance. So the place that I choose for my stop-loss is that of a strategic area and a point to where I know, that if it hits the stop, I know that my thesis is no longer valid and therefore, I must exit the trade. (more…)

Just follow these Trading Rules


 Stops – a stop price must be in place at all times for all positions.

 Balance – this one is the hardest of all to define, but because it is impossible to know with certainty the future direction of the market, a balance between bullish and bearish positions is the most prudent. In addition, if you are heavily weighted either bullish or bearish, and if the market moves strongly in your favor intraday, you should consider taking on a large opposite day-trade position for “insurance” profits in case that intraday move reverses. 

Freshness – positions should be regularly refreshed for the sake of updated stops. This is especially important when the market has moved in your direction a meaningful amount so that you can lock in some profits with tighter stops.

Emotional Awareness – use emotional awareness to your advantage, understanding fear often accompanies reversals in your favor and hubris often accompanies reversals against your positions.

Exits – the only acceptable exit is either being stopped out of a position or reaching a target price which has a clear technical rationale, and even in cases of the latter, partial exits are preferable to outright closes. (more…)

Patience and Discipline

While these two virtues are over-worked and very often mentioned when determining what unsuccessful traders lack, not many will argue with their merits. Indeed. Don’t trade just for the sake of trading or just because you haven’t traded for a while. Let those very good trading “set-ups” come to you, and then act upon them in a prudent way. The market will do what the market wants to do — and nobody can force the market’s hand.

Effortless Trading

20081017effortlessBeing in the flow happens effortlessly. It is something that just overtakes you and consumes your every being. It’s a wonderful feeling occuring only in activities that you enjoy very much. In my case, trading is one of those activities. Here’s how Mihaly Csikszentmihalyi describes it: Flow is being completely involved in an activity for its own sake. The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one, like playing jazz. Now that’s something to strive for!

Kung Fu vs. Trading

You can learn a lot on trading by watching Kung Fu. Sounds crazy? Let me explain by the following video.

The first scene is where the market offers you an opportunity for a duel. Your opponent seems strong and fierce, but it’s not just about muscles and brute force.

– Bruce Lee shows respect for his opponent in the first scene. This is very important. Never understimate the market and always be nimble.

– When his opponent tries to scare him by breaking a wooden board, Bruce Lee does not show fear. You should never fear the market. Always have a clear mind but be watchful at all times. The market will test you. It will find your weak spots.

– It is okay to test the waters with small positions if you are not sure. As Bruce Lee shows by striking the first two blows, he is just testing his opponent’s speed. Checking to see if the water is safe to jump into.

– When Bruce Lee does a backflip kick, he shows his flexibility. The market might sneak up on you with a move you did not expect. It is your job to be prepared for anything and move as flexible as you can.

– Sometimes the market will go bezerk on you, trying to grab you by the balls. Again, you have to play tight defense at all times so you will not get hurt.

– Bruce Lee shows his amazing talent by performing a backturn kick onto his opponent. This is a highly effective and powerful strategy. Once you have developed a system that works for you, don’t try to change it for the sake of entertainment. It if works, it works! And that is great!

– From time to time you will make a great trade. Like when Bruce Lee kicks his opponent into the crowd. Don’t let this get into your head by thinking you own the market! Always stay nimble and be ready to strike again.

– You may think a fight is over. You may turn your back on a position thinking you have won. If you are up nice on a position and trade without a stop, you can still get hurt. Always play with stops. The market may sneak up from behind and pull a big gap down on you! Don’t let this happen. Always stay watchful and never trade without stops.

– Bruce Lee decides to end the fight finally. Don’t overstay your welcome in a trade. If you are up nicely and can take profits do so. We are not investors. We are traders. Finish the fight now and then and take profits. If you never finish a fight you will never take profits. If you never take profits you will never make money.

Have the proper mindset

Trading is not for everyone.  There certainly is a high burnout factor among professional traders due to the stress involved.  Think of the markets as various shark tanks, with a certain number of sharks fighting for those scraps of meat.

Some of the work personality traits that will help you succeed over the long run include:

Having a thick skin, being able to remove emotions, ability to think clearly in the moment when all hell is breaking loose, attention to detail, pattern recognition, analytical mind, aversion to gambling for gambling’s sake, creative and innovative thinking.

These can be developed through experience, although some certainly have these more “ingrained” in themselves from the beginning.  Having a full life outside of your trading is also important – the ability to “switch off” and not take your trading results home with you each day will lead to a longer and happier trading career.

5 Characteristics of Successful Trader

Knowledge – A trader must put in the time and effort to study and learn the proper skills in order to be successful. Whether that is through technical or fundamental analysis, one must invest in their education. They must completely understand their market, and its ideal as a beginner to focus on one market and be a specialist. A part of the knowledge and education is devising a game plan or strategy for trading. Writing down your rules and sticking to your trading plan is a key to success.

 Controlling your emotions – The ability to control your fear and greed is paramount to success. A successful trader will have a balanced emotional state regardless if he/she is winning or losing. Ensuring the trader has a clear head and is able to pull the trigger and take trades every time an opportunity presents itself.

  Patience – A successful trader can sit on the sidelines for days waiting for the proper setup. They don’t jump into a trade just for the sake of trading. Yes there may be opportunities, but the smart trader waits for trades that meet their trading rules and system. Over trading by beginner traders is a big obstacle to overcome. A need to always be in the market will lead to taking trades that are likely too risky. Learn patience, it’s a key to success. A winning trader usually has an extraordinary amount of self control, and often the best trade is no trade.

 Discipline – There are no 100% winning traders and taking losses are part of the trading profession. It is about finding high probability opportunities and managing the risks on each trade. A trader must stick to their trading plan and discipline is the key to success.

Confidence – Having the confidence in yourself and your system to make your profit or take a loss when your method tells you to is a winning trait. Confidence usually comes from experience and knowledge.

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